Does Florida Have An Inheritance Tax?

Are you concerned about preserving your hard-earned wealth for future generations? While Florida is a bright spot with some tax advantages, the federal estate tax is still a factor to consider. This guide breaks down the Florida inheritance tax landscape, but should be read in conjunction with our Federal Estate Tax piece, to get a full understanding of your estate’s tax implications

Let’s Break Down Some Important Terms First

Since we’re dealing with several key tax terms, to avoid confusion, we’re going to outline what these are here, so you can refer back to them when/if needed.

• State-Level Estate Taxes: These taxes are imposed by individual states on the transfer of a deceased person’s estate; based on its total value.
• Inheritance Tax: This tax is levied by some states on the beneficiaries who receive assets from a deceased person’s estate.
• Federal Estate Tax: A tax imposed by the federal government on the transfer of a deceased person’s estate.

Florida’s Tax-Friendly Environment

For those living in the Sunshine State, there’s no imposed state-level estate or Florida inheritance taxes, making it one of the most tax-friendly states in the United States. But, what if you reside in Florida and inherit a property from another state? You may be subject to that state’s inheritance tax.

Understanding Federal Estate Taxes in Florida

While you don’t have to worry about state-level or Florida inheritance taxes, there’s still going to be federal estate taxes that should be paid out when your property is transferred. The good news here is that if your estate is worth less than $13.6 million (as of 2024), you won’t owe any federal estate taxes.

What If My Property is Valued Over The Federal Estate Tax Exemption?

If your estate exceeds the $13.6 million exemption, federal estate taxes are owed on the amount that sits above the limit. For example, a $14.05 million estate would owe taxes on the $440,000 portion. Federal estate tax rates are progressive, reaching up to 40%.

Can I Minimize Tax Liability?

Yes, there are strategies you can use to lower how much tax you pay out when estate planning. Examples are:

1. Gift Giving: You can gift up to $18,000 (2024) per recipient annually without federal gift taxes. This reduces your taxable estate, and allows you to gradually transfer wealth to loved ones without being hit by additional taxes.

2. Take Advantage Of Florida’s Homestead Exemption: Using Florida’s unique Homestead Exemption can significantly decrease how much property tax you owe on your home’s value. This could protect up to $50,000 from taxation.

3. Open Tax-Deferred Accounts: You can open tax-deferred accounts like IRAs and 401(k)s, so that taxes are only paid out when you withdraw.

4. Establish a Trust: Trusts can minimize federal estate taxes and ensure assets are distributed according to your wishes when you pass. Look into options like revocable living trusts, irrevocable trusts, and charitable trusts.

5. Income from the Estate: Any income generated by the estate, such as rental income, is taxable.

6. Capital Gains on Inherited Property: Any inherited assets benefit from a “step-up” in basis, meaning taxes are only paid on the appreciation from the date of inheritance to the sale date. For example, if your grandmother purchased a family home for $100,000 in 1980 and it’s now worth $500,000, the ‘step-up’ in basis means you only pay taxes on the appreciation from the time of inheritance.

Other Things You Should Know As A Florida Resident

• Relocation to Florida: If you move to Florida, retitle your assets to avoid claims from your previous state.
• Retirement Accounts: Consider rolling over retirement accounts to align with Florida’s federal estate tax regulations.
• Generation-Skipping Transfer Tax: This is a federal tax that’s applied to transfers of wealth that skip over a generation. It’s designed to prevent individuals from avoiding estate and gift taxes by transferring assets to grandchildren or other beneficiaries who are two generations younger than the giver.

Secure Your Legacy With Finity Law

At Finity Law, we recognize that every estate is unique, requiring personalized strategies to meet individual needs. Our dedicated team of estate planning attorneys is committed to guiding you through the intricacies of federal estate tax laws, ensuring your legacy is secure.

Ready to Protect Your Wealth? Don’t leave your future to chance. Contact us today to schedule a consultation and discover how we can help you plan for tomorrow with confidence.