What Are the Tax Implications of Selling a Business in Florida?

Florida Business Sale Tax Guide: What You’ll Owe and How to Prepare

Selling a business is a major financial event, and without proper planning, a significant portion of your sale proceeds can go to federal taxes. Florida’s lack of state income tax is a meaningful advantage, but federal taxes can still claim 20%–40% or more of your gain depending on your deal structure. Here’s what you need to know before you close.

Florida Has No State Income Tax

Florida does not have a personal income tax or a state capital gains tax. For Florida residents, this means all tax planning focuses on federal obligations, there’s no additional state layer to worry about. This is a significant advantage compared to states like California (13.3% state capital gains rate) or New York (10.9%). For out-of-state buyers considering a Florida business, residency in Florida can be a significant tax planning strategy worth discussing with a CPA.

Federal Capital Gains Tax

The majority of most business sale proceeds qualify for long-term capital gains treatment if the business has been held for more than one year. Federal long-term capital gains rates are 0%, 15%, or 20% depending on your taxable income. For most business sellers, the rate is 20%.

High-income earners also pay a 3.8% Net Investment Income Tax (NIIT) on top of capital gains, bringing the effective federal rate to 23.8% for individuals with modified adjusted gross income above $200,000 ($250,000 for married couples filing jointly).

Depreciation Recapture Tax

Depreciation recapture is the most commonly overlooked tax in a business sale. Over the years, you’ve deducted depreciation on equipment, vehicles, furniture, and (if you own real estate) buildings. When you sell, the IRS “recaptures” those deductions:

• Section 1245 recapture (personal property: equipment, vehicles): Taxed at ordinary income rates, up to 37%
• Section 1250 recapture (real property: buildings): Taxed at a maximum 25% “unrecaptured Section 1250 gain” rate

Depreciation recapture applies regardless of how long you’ve held the asset and cannot be avoided through installment sale elections (it’s recognized in the year of sale).

Ordinary Income on Non-Compete Payments

If your purchase agreement allocates any portion of the sale price to a non-compete agreement (common in business sales), that amount is taxed as ordinary income, not capital gains. Because buyers want to allocate more to depreciable assets (equipment) and sellers want to allocate more to goodwill (capital gains), the negotiation of purchase price allocation has direct tax consequences for both parties.

Florida Documentary Stamp Tax

Florida does impose documentary stamp taxes on the transfer of real estate and certain business documents. If your business sale includes real property, documentary stamp taxes of $0.70 per $100 of consideration (for most counties) apply to the deed. For a $1 million real estate transaction, that’s $7,000 in documentary stamp tax. Consult your real estate attorney about who bears this cost in your transaction.

Planning Strategies to Reduce Your Tax Bill

The most effective strategies depend on your deal structure and entity type. Common approaches include: installment sales (spreading gain across multiple years), Qualified Opportunity Zone investments (deferring and partially excluding capital gains), 1031 exchanges on real estate components, Charitable Remainder Trusts, and personal goodwill planning for C corporation sellers. All of these require advance planning, ideally 12–24 months before closing.

Work with a CPA and M&A Advisor Together

Tax planning for a business sale is not something to address after the deal closes. Ryan C. Winter works in coordination with your CPA throughout the sale process to help structure your St. Augustine business sale for maximum after-tax proceeds. Contact us to start the conversation.

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Related Reading

• What Is a Letter of Intent When Selling a Business in Florida?
• What Is Due Diligence When Selling a Business in Florida?
• How to Sell a Business Without a Broker in Florida

• Category: Northeast Florida, Selling a Business