1031 Exchange in Florida: Doc Stamps, Reset Caps and Out-of-State DST Tax

Documentary stamps are paid on the relinquished deed, exchange or not

Florida's documentary stamp tax attaches to the deed, and the Department of Revenue makes every party to the document liable 'regardless of which party agrees to pay the tax.' The rate is 70 cents on each $100, or fraction of $100, of consideration, so a $1,500,000 sale carries $10,500 in stamps at the clerk's office.

The Department's guidance defines consideration to include money paid, mortgages encumbering the property and, explicitly, 'exchange of property,' valued at the fair market value of the real estate. A section 1031 exchange therefore pays full stamps; the tax is on the transfer, and the federal deferral is irrelevant to it.

Stamps are paid when the deed is recorded, and an unrecorded transfer must still be reported and paid on the Department's return. Who writes the check is contractual; the Department will collect from any non-exempt party if the tax is short.

Miami-Dade's surtax and the three-year conduit-entity trap

Miami-Dade County uses a 60-cent rate plus a 45-cent discretionary surtax on documents that transfer anything other than a single-family dwelling, so a Miami-Dade apartment building or retail center pays $1.05 per $100, the highest deed tax in the state. A Miami-Dade single-family rental pays only the 60 cents.

Florida also closed the 'drop and swap' route around stamps. Under section 201.02(1)(b), an entity that receives Florida real property from an owner for less than fair market value is a conduit entity, and a transfer of interests in that entity within three years is taxed at 70 cents per $100 as if the deed itself had been sold, prorated if the entity holds other assets.

For an exchanger this means contributing the property to a new LLC shortly before sale and then selling the LLC saves no stamps and can complicate the same-taxpayer requirement of the exchange. Sell the deed, pay the stamps, and keep the exchange clean.

The buyer's caps reset: what a Florida sale does to next year's tax bill

Florida limits annual assessment increases on non-homestead property to 10% for all levies other than school district levies under section 193.1555, and 'property assessed under this section shall be assessed at just value as of January 1 of the year following a qualifying improvement or change of ownership or control.' The buyer of your rental keeps the cap for the rest of the closing year and then starts over at market.

Change of ownership or control includes 'the cumulative transfer of control or of more than 50 percent of the ownership of the legal entity that owned the property,' so selling the LLC resets the cap just as a deed does. Owners under the cap must notify the property appraiser of such transfers.

If the property was your homestead before you converted it to a rental, Save Our Homes capped it at 3% or CPI, whichever is lower, and the Pinellas County Property Appraiser warns that removing the cap 'may double or even triple taxes.' Buyers of Florida replacement property should underwrite the post-reset bill, not the seller's.

Florida has nothing to withhold and nothing to claw back

Article VII, section 5 of the Florida Constitution provides that no tax 'upon the income of natural persons who are residents or citizens of the state' may be levied except to the extent it could be credited against a federal income tax, which in practice is zero. There is no Florida capital gains tax, no Florida return for individuals, and consequently no state form to file when you exchange.

Florida likewise has no nonresident withholding at closing; the only withholding a Florida closing agent applies is federal FIRPTA withholding on foreign sellers. Out-of-state owners of Florida rentals owe their home state, not Florida, on the gain.

A claw-back rule needs an income tax to attach to, so Florida has none. A Floridian who exchanges into property in California or Oregon should instead ask about those states' rules on the replacement side.

Financing Florida replacement property adds note stamps and intangible tax

If your replacement property is Florida real estate bought with a mortgage, two more taxes appear at recording: documentary stamps on the note at 35 cents per $100, uncapped when secured by a mortgage, and the nonrecurring intangible tax of 2 mills on each dollar of the obligation secured by Florida real property under section 199.133. On a $1,000,000 loan that is $3,500 plus $2,000.

These are borrower-side costs that reduce the cash available to satisfy the reinvestment test, so account for them when sizing the replacement purchase within the 180-day window. A DST purchase relies on sponsor-level financing already in place, so the investor does not record a new Florida mortgage.

Corporate and LLC sellers: the one Florida income tax that can apply

The constitutional ban covers natural persons only. Florida imposes a 5.5% corporate income tax on C corporations and on LLCs classified as corporations, after a $50,000 exemption, computed from federal taxable income modified by Florida adjustments.

Because the starting point is federal taxable income, a corporate seller's section 1031 deferral flows through to the Florida corporate return. Partnerships and most S corporations pay no Florida income tax at all, so the typical LLC-owned rental has no Florida income tax exposure in either a sale or an exchange.