Primary Residence vs. Investment Property Considerations
If you’re thinking about selling a home in Tampa, one of the first questions we get is:
“How much will I owe in capital gains taxes?”
After more than 40 combined years helping buyers, sellers, and investors navigate the Tampa Bay market, we can tell you this: understanding capital gains before you list your home can dramatically impact your net proceeds.
Let’s break it down clearly.
What Are Capital Gains Taxes?
Capital gains taxes apply to the profit you make when you sell a property. That profit is the difference between:
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What you paid for the home (plus improvements and certain closing costs), and
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What you sell it for.
But how much you owe—and whether you owe anything at all—depends heavily on whether the property was your primary residence or an investment property.
And this is where strategy matters.
Selling Your Primary Residence in Tampa
Here’s the good news for most homeowners.
If the home you’re selling has been your primary residence, you may qualify for a significant tax exclusion under federal law.
You can exclude:
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Up to $250,000 in capital gains if you’re single
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Up to $500,000 if you’re married filing jointly
To qualify, you must:
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Have owned the home for at least 2 of the last 5 years, and
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Lived in it as your primary residence for at least 2 of the last 5 years
This exclusion is one of the biggest wealth-building advantages of homeownership.
In Tampa, where home values have appreciated substantially over the past several years, many of our clients fall under that exclusion threshold—meaning they owe zero capital gains tax.
That said, if you’ve owned in highly appreciating areas like South Tampa, Water Street, or certain waterfront communities, your gains could exceed those limits. That’s where proper documentation of improvements and strategic planning becomes critical.
We always advise clients to track:
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Major renovations
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Roof replacements
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HVAC upgrades
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Structural improvements
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Closing costs from purchase
These can increase your cost basis and reduce your taxable gain.
Selling an Investment Property in Tampa
Now let’s talk about investment properties—because this is very different.
If the property was a rental, second home, or flip, you generally do not qualify for the primary residence exclusion.
Instead, you may owe:
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Capital gains tax on your profit
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Depreciation recapture tax if you claimed depreciation
For long-term holdings (over one year), federal capital gains rates are typically lower than ordinary income rates. But depreciation recapture can be taxed at up to 25%.
This is where investors often get surprised.
In Tampa’s strong rental markets—Seminole Heights, Westchase, New Tampa, Riverview—we’ve seen significant appreciation. Investors who purchased 5–10 years ago may be sitting on substantial gains.
Before listing, we often walk our investors through key questions:
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Would a 1031 exchange make sense to defer taxes?
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Is this the right time to liquidate, or should we refinance instead?
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Are there ways to offset gains with other investment losses?
Strategic timing can make a huge difference in net profit.
What If You Converted a Rental Into Your Primary Home?
This is becoming more common in Tampa.
Some buyers purchase a property as a rental and later move into it. Others turn their primary home into a rental before selling.
In these situations, the tax treatment can become more complex. The primary residence exclusion may still apply—but it could be prorated based on how long the home was used as a rental.
This is where working with both a knowledgeable real estate team and a qualified CPA is essential.
Why This Matters in Tampa’s Market
Tampa has experienced strong appreciation across the board—from downtown condos to suburban single-family homes to waterfront estates.
With that appreciation comes opportunity—but also potential tax exposure.
Before you sell, ask:
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What’s my estimated net after taxes?
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Does it make sense to sell now or later?
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Should I reposition into another property?
We don’t just list homes—we help you make strategic wealth decisions.
Our Advice After 40+ Years in Tampa Real Estate
Capital gains tax isn’t something you think about on closing day. It’s something you plan for before you go to market.
Every seller’s situation is unique. Primary homeowners often benefit from powerful exclusions. Investors need strategy and foresight.
Our job at The Lewkowicz Group is to help you understand your options, connect you with the right tax professionals, and structure your sale in a way that protects your long-term wealth.
If you’re considering selling in Tampa—whether it’s your home or part of your investment portfolio—let’s talk first.
Because in this market, strategy is everything.
