Did you know that, generally speaking, Florida’s lack of an inheritance tax, also commonly called an estate tax or death tax, means that the state of Florida does not impose any taxes when an estate is transferred at a person’s death to his or her heirs? Florida residents, however, are still subject to the federal estate tax, and if you live in Florida but own property in another state, your property might be subject to that state’s estate tax. Let us talk more about how inheritance tax works for Florida residents.
The Florida state constitution bans inheritance tax, gift tax, and even income tax at the state level. The state legislature would not be allowed to impose an estate tax that goes against the state constitution, and Florida voters would need to vote yes to amending the state constitution in order to change this. Since state constitutional amendments in Florida require a minimum of 60% approval of the voters, it is highly unlikely this will change anytime soon.
Florida residents do not pay state income tax, but they still owe federal income tax and pay into Social Security and Medicare taxes just like residents of other states in the United States. Similarly, when it comes to the estate tax, Floridians who have large enough estates to exceed the federal estate tax exemption may still owe estate tax at the federal level. The current estate tax exemption is $11.7 million for an individual and $23.4 million for a married couple, so very few Floridians need to worry about this. These exemption levels, however, may change, so if you have a sizable estate that is below these thresholds but still in the millions of dollars, it may be time for some estate tax planning.
Even if you are a Florida resident, if you own a second home in another state you may owe estate tax in that state when the property is transferred at your death. It depends on whether the other state has its own state estate tax and what the threshold is for your property to be captured by the tax.
For assistance navigating estate tax implications and more, please reach out to our office to schedule an appointment.