Inheriting property in Miami can feel like both a blessing and a burden. While Florida doesn’t impose an inheritance tax, heirs often face another financial concern: capital gains taxes.
If you inherit a Miami home, condo, or investment property and later decide to sell, you may owe taxes on the profit. The good news? Florida law and the IRS offer special rules that can significantly reduce what you owe. A Miami estate planning attorney can guide you through these regulations and safeguard your inheritance.
What Are Capital Gains Taxes?
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Capital gains tax applies when you sell an asset for more than you paid for it.
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The tax is based on the profit (gain), not the full sale price.
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Rates vary depending on how long you owned the asset and your income bracket.
Example: If you buy a property for $200,000 and sell for $500,000, the $300,000 gain is taxable.
How Capital Gains Work with Inherited Property (Step-Up in Basis)
The IRS gives heirs a major benefit known as the “step-up in basis.”
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Instead of inheriting the property at the original purchase price, heirs inherit it at the property’s fair market value on the date of death.
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This greatly reduces (and sometimes eliminates) capital gains taxes when selling.
Example:
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Original purchase price of Miami condo: $150,000.
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Value at date of death: $800,000.
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You inherit with a basis of $800,000.
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If you sell for $820,000, you only owe tax on the $20,000 gain, not $670,000.
Is There an Inheritance Tax or Estate Tax in Florida?
These are two different taxes, and Florida doesn’t have either one. An inheritance tax would be paid by the person receiving the property; an estate tax would be paid by the estate itself before assets are distributed. Florida repealed its estate tax years ago and has never had an inheritance tax. The only tax you may owe as a Miami heir is federal capital gains tax, and only if you sell the property for more than its stepped-up value; covered below.
When You May Owe Capital Gains on Inherited Property
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Selling Later at a Higher Price
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If the property appreciates after you inherit, you’ll owe tax on the increase.
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Rental Income During Ownership
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If you rent out the property before selling, that income is taxable.
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Inherited Business or Investment Property
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Commercial property or stocks may create capital gains when sold.
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Florida’s Advantage: No State Capital Gains Tax
- Florida does not have a state income tax.
- This means heirs only owe federal capital gains tax when selling inherited property.
This makes inheriting real estate in Miami more favorable compared to states like California or New York.
How to Sell an Inherited House in Miami, Miami Gardens, or North Miami
Selling an inherited home works differently depending on where the estate stands in probate:
- If the estate has already closed and the property was distributed to you, you own it outright and can sell it like any other home, no court approval required.
- If the estate is still open, the personal representative may need court approval to sell, depending on whether the will grants them that power directly.
- If you inherited the house with siblings or other heirs, everyone named on the deed generally has to agree to the sale, or one heir can buy out the others.
This applies the same way whether the property is in Miami, Miami Gardens, North Miami, or North Miami Beach; what changes is which local market data an appraiser or agent will use to set the price.
What Does It Cost to Sell an Inherited House?
Beyond any capital gains tax owed, selling costs typically include:
- Real estate commission, usually around 5–6% of the sale price
- Closing costs, generally 1–3% of the sale price
- Any remaining mortgage balance, paid off from the proceeds at closing
- Repairs or updates needed to sell at market value
These come out of the sale proceeds before anything is distributed among heirs, so it’s worth budgeting for them separately from the tax question.
Ways to Reduce or Avoid Capital Gains Tax on Inherited Property
A few legitimate strategies can lower or eliminate the tax owed:
- Sell soon after inheriting. The closer the sale is to the date of death, the closer the sale price stays to the stepped-up basis, minimizing taxable gain.
- Get a proper date-of-death appraisal. An accurate appraisal sets your basis correctly from the start, which protects you if the IRS ever questions the numbers.
- Move in and make it your primary residence. Living in the home for at least two years before selling can qualify you for the personal residence exclusion on top of the step-up in basis.
- Consider a 1031 exchange if you plan to keep the money in real estate rather than cash it out, deferring the gain into a new property.
How a Probate Lawyer Helps with Capital Gains Issues
A Miami probate lawyer works with tax professionals to:
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Ensure assets are properly valued at the time of death (step-up in basis).
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Minimize capital gains when selling inherited property.
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Handle IRS reporting and compliance.
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Advise heirs on whether to keep, rent, or sell inherited real estate.
Local Note: Miami’s rapidly appreciating housing market makes proper valuation essential. A probate lawyer ensures accurate appraisals so heirs don’t overpay taxes.
FAQs About Capital Gains and Inherited Property
Q: Do I owe capital gains tax if I keep the property?
No. Taxes are only due if you sell at a profit.
Q: What if I sell the inherited property immediately?
If sold near the date of death, the step-up in basis usually eliminates most capital gains.
Q: Can siblings split inherited property without tax consequences?
Transfers as part of probate usually don’t trigger taxes, but selling later may.
Q: Is there an inheritance tax in Florida?
No. Florida has never had an inheritance tax, so heirs owe nothing to the state simply for receiving property.
Q: Is there an estate tax in Florida?
No. Florida repealed its estate tax, so the estate itself doesn’t owe Florida tax before distributing assets to heirs.
Q: Can multiple siblings sell an inherited house together?
Yes. If several heirs inherit a property jointly, all generally have to agree to a sale, or one heir can buy out the others’ shares.
Q: Do I have to pay capital gains tax if I inherited the house with a mortgage still on it?
The mortgage balance doesn’t affect capital gains tax directly, but it does reduce your net proceeds at closing since it has to be paid off from the sale.
Get Help Selling or Managing Inherited Property
Whether you’re deciding to keep, rent, or sell an inherited Miami-area home, getting the valuation and timing right protects you from paying more tax than you owe. Attorney Yanitza Schoonover works with tax professionals to make sure inherited property is valued correctly and sold on the right terms. Call (305) 299-7496 or schedule a free consultation.
