Adjusted Basis for Florida Property
Adjusted basis is a tax concept representing the original cost of a property plus capital improvements minus depreciation. When a Florida property owner sells, the difference between the sale price and the adjusted basis determines the taxable capital gain.
Calculating Adjusted Basis
The calculation starts with the acquisition cost: the purchase price plus closing costs such as title insurance, recording fees, and documentary stamp taxes. Capital improvements made during ownership are added: roof replacements, impact windows, room additions, and other permanent improvements that extend the property's life or add value. Any depreciation claimed (common for rental properties) is subtracted.
Impact on Florida Home Sales
For Florida's primary residence sellers, the Section 121 exclusion allows up to $250,000 ($500,000 for married couples) of capital gain to be excluded from federal income tax. Adjusted basis determines whether the gain exceeds this threshold. Investment property owners cannot use the Section 121 exclusion but may defer gain through a 1031 like-kind exchange. In both cases, maintaining detailed records of improvements is essential to maximizing the adjusted basis and minimizing tax liability.
Related Terms
- Capital Gains
- Depreciation
- 1031 Exchange
Barnes Walker Real Estate
Barnes Walker advises Florida property owners on tax planning strategies for sales and exchanges. Contact us to discuss your transaction's tax implications.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC