Selling a Miami-Dade Rental? What You'll Owe in Tax

What will you owe in tax when you sell a Miami-Dade rental property?

Expect federal tax only — Florida has no state income tax — but the federal bill has three layers: depreciation you've claimed (or could have claimed) is taxed at up to 25%, the rest of your gain at 15% or 20%, and a 3.8% surtax can apply on top. On a $600,000 rental sold for $850,000 after ten years, that adds up to roughly $80,000 to $89,000. Run the number before you list, not after you've accepted an offer.

By Pedro Casanova | October 14, 2026

Most landlords I talk to know their mortgage payoff to the dollar. Almost none know what the IRS will take after closing. That gap is the single most common surprise for Miami-Dade rental owners who decide to sell — and it's why the question keeps showing up on investor forums and tax-help threads, often from someone who just found out their gain isn't taxed at the 15% they expected.

Here's how the math works, with a real example. I'm not a CPA, so treat this as the framework you bring to yours.

The three layers of tax on a rental sale

Layer one: depreciation recapture. Every year you own a residential rental, the IRS expects you to deduct a slice of the building's cost over 27.5 years. When you sell, the gain that equals that accumulated depreciation is called unrecaptured Section 1250 gain, and it's taxed at your ordinary rate, capped at 25%. Here's the part that catches people: the rule is "allowed or allowable." If you never claimed depreciation, the IRS still treats your basis as if you had.

Layer two: long-term capital gains. Whatever gain is left after that is taxed at 0%, 15%, or 20%, depending on your taxable income. For 2026, the 15% rate runs up to $545,500 of taxable income for single filers and $613,700 for married couples filing jointly. Because the entire gain lands in one year, many sellers get pushed into a higher bracket than their salary alone would suggest.

Layer three: the 3.8% net investment income tax. It applies when modified adjusted gross income passes $200,000 (single) or $250,000 (married filing jointly) — thresholds that aren't indexed to inflation, so more sellers cross them every year. A sale that pushes you over can pull the surtax onto the gain.

A Miami-Dade example, line by line

Say you bought a townhome in Kendall ten years ago for $600,000 and rented it out since. Land isn't depreciable, so assume 30% of the price was land (your county assessment or closing records will show the actual split). That leaves a $420,000 building.

• Annual depreciation: $420,000 ÷ 27.5 = about $15,273
• Ten years of depreciation: about $152,700
• Sale price: $850,000
• Selling costs: about $60,000 (commission, $5,100 in deed doc stamps at $0.60 per $100, title and closing fees)
• Net sale price: $790,000
• Adjusted basis: $600,000 − $152,700 = $447,300
• Total taxable gain: about $342,700

Now the tax:

• Depreciation layer: $152,700 × 25% = about $38,200
• Remaining gain: $190,000 × 15% = about $28,500 (or $38,000 at 20%)
• Net investment income tax: $342,700 × 3.8% = about $13,000
• Total federal tax: roughly $79,700, or about $89,200 if you land in the 20% bracket

If you owe $300,000 on the mortgage, you'd leave the closing table with about $490,000 — and owe around $80,000 of it next April. Your actual number moves with your filing status, other income, improvements you've capitalized, and how much of the price was land. A condo adds one more cost: the $0.45 per $100 doc stamp surtax on non-single-family properties, which would add about $3,800 here.

Four ways to change the bill

1. 1031 exchange. You defer both the recapture and the capital gain by buying replacement property — but the clock is unforgiving: 45 days to identify, 180 days to close. In this market, finding the replacement is usually the hard part. I cover the bigger sell-hold-exchange picture in our guide to selling a Miami-Dade rental in 2026.
2. Installment sale. If you carry the note, you can spread the unrecaptured Section 1250 gain over the life of the loan — but under IRC Section 453(i), any ordinary-rate recapture from accelerated depreciation or cost segregation is taxed in the year you sell, even if you received little cash.
3. Time the sale. Selling in a year when your other income is lower can keep more of the gain in the 15% bracket and under the surtax thresholds. Even moving closing from December to January changes which tax year takes the hit.
4. Hold for the step-up. When an owner dies, heirs generally receive a stepped-up basis, which erases the built-up depreciation recapture. That's an estate-planning decision, not a sales tactic — but it's the reason some owners hold. If you've inherited a property yourself, here's how the tax picture changes.

Cost segregation studies deserve a flag. They speed up deductions, but the part reclassified as personal property comes back as ordinary-rate recapture at sale. If you've done one, tell your CPA before you list.

The sell-or-hold math most landlords skip

A rental can look fine on paper and still be a bad hold. Miami-Dade condo inventory has run well above a balanced market in 2026, insurance and association costs eat into net rent, and investors on forums like BiggerPockets keep pointing out that advertised cap rates often leave out real expenses. Weigh your after-tax proceeds against what that money could earn elsewhere — and compare it with keeping the property and renting it out if you're also thinking about moving up.

Your specific number depends on your purchase date, improvements, land allocation, and income that year. That's why I run an estimated net sheet — sale price, costs, payoff, and a tax estimate you can hand to your CPA — before we ever discuss listing price.

Frequently Asked Questions

Do I owe depreciation recapture if I never claimed depreciation on my rental?

Yes. The IRS calculates your adjusted basis using depreciation "allowed or allowable," so skipping the deduction doesn't skip the recapture. Talk to a CPA about whether you can still correct past years before you sell.

What is the depreciation recapture tax rate for a Miami-Dade rental?

Unrecaptured Section 1250 gain is taxed at your ordinary income rate, capped at 25%. Florida adds no state income tax, so the cap is the federal figure. If your bracket is below 25%, the lower rate applies.

Does a 1031 exchange eliminate the tax?

No — it defers it. You must identify replacement property within 45 days and close within 180 days, and the deferred gain follows you into the new property. The tax is generally erased only if the property passes to heirs with a stepped-up basis.

Does the net investment income tax apply to rental sales?

It can. The 3.8% surtax applies when modified adjusted gross income exceeds $200,000 (single) or $250,000 (married filing jointly), and the gain from the sale itself can push you over. Those thresholds are not adjusted for inflation.

How much of the sale price comes out as tax on a Miami-Dade rental?

In the example above, tax runs about 23% to 26% of the gain, or roughly 9% to 10% of the sale price. Your result depends on how long you've held it and your income that year.

Next step

Selling a rental is a tax decision before it's a pricing decision. If you want to see what you'd keep after closing costs and federal tax — and whether selling, exchanging, or holding is your best move — I offer a free buying or selling strategy session. It's a straight conversation about where you stand, no pressure. You can grab a time here.

This post is general information, not tax or legal advice. Confirm your numbers with a CPA or tax attorney.

About Pedro Casanova

Pedro Casanova is a real estate broker that leads The KREN Group real estate team serving the Southeast Florida area. They specialize in helping people build wealth through real estate by helping buyers and sellers maximize their opportunity in every transaction. Connect with the team at www.thekrengroup.com.

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