Taxes in Florida: Does the State Impose an Inheritance Tax?

As of 2020, only six states impose an inheritance tax on its residents, but Florida is not one of them. An inheritance tax is a tax on assets that an individual has inherited from someone who has died.  An inheritance is not necessarily considered “income” to the recipient.  Moreover, Florida does not have a state estate tax.  An estate tax is a tax on a deceased person’s assets after death.  Florida is one of those states that has neither an inheritance tax nor a state estate tax.

Who Has to Pay Federal Estate Taxes?

The federal government does have an estate tax that applies to all US citizens.  This tax is paid by the decedent’s estate NOT the heirs or beneficiaries of the decedent.  Moreover, the federal estate tax affects a small portion of the population because, as of this year, the estate tax is for those estates with over $11.58 million in assets.

Beneficiaries in Florida May Still Have to Pay Taxes on Inheritances

Even though Florida does not impose an inheritance tax, heirs and beneficiaries in Florida may still have to pay some form of taxes associated with inheritances when:

• Withdrawing funds from the decedent’s retirement accounts. While Florida does not impose taxes on the inheritance or transfer of retirement accounts, including IRAs and 401k, beneficiaries may incur a tax when withdrawing funds from the decedent’s retirement accounts.
• Receiving property that generates income. If you receive property that generates income, you will have to pay taxes on the income generated after the decedent’s date of death.
• Selling inherited property and assets. While beneficiaries do not have to pay income taxes when they receive property directly from the decedent’s estate or trust, they may incur taxes when selling the property or assets that they inherited if the funds are subject to income taxation. However, the income tax is only based on the increase in the value of the property from the date of the decedent’s death to the date of the sale.
• Inheriting from a non-citizen. Beneficiaries may have to pay taxes on inheritance if the decedent was not a citizen of the United States. Also, there may be additional taxes if the beneficiary is a non-U.S. citizen. If the deceased person was not a citizen or permanent resident who owned property in the State of Florida, their property may be taxed upon their passing. It is advised to consult with an estate planning lawyer to learn more about taxes when inheriting from a non-US citizen.

If you need more information about estate or inheritance tax in Florida, seek legal counsel from a knowledgeable lawyer to discuss your particular situation. Contact our St. Petersburg estate planning attorneys at Legacy Protection Lawyers, LLP, to schedule a consultation at 727-471-5868.

Resource:

irs.gov/businesses/small-businesses-self-employed/whats-new-estate-and-gift-tax