Do Inheritance And Estate Taxes Apply In Florida?
If you have recently received a large inheritance in Florida, you may be wondering what the tax ramifications are. Many states impose inheritance and estate taxes that can be complex and frustrating. However, Florida has a reputation for being one of the most tax-friendly states, and that reputation is warranted. Florida is one of only a few states that does not tax income. That means that social security income, retirement accounts, and pensions are all tax-free. Believe it or not, the same goes for inheritance.
Is there an Inheritance Tax in Florida?
In short, there is no inheritance tax in Florida, setting it apart from many other states and providing a real incentive to reside there for anyone expecting a large inheritance. Not only that, but Florida also does not levy an estate tax. While some states treat inheritance as income, requiring it to be taxed under the state’s income tax, Florida does not have a state-imposed income tax, so the inheritance avoids this fate as well. Some states also impose gift taxes on inheritance, but–you guessed it–Florida does not have a gift tax either.
Inheritance Tax Caveats to Be Aware Of
One thing to be aware of is that while Florida does not have an inheritance tax, there is still a federally imposed inheritance tax. The federal inheritance tax, however, only applies to inheritances over $11.7 million. If an inheritance is greater than $11.7 million, only the amount over $11.7 million will be subject to the federal estate tax. The first $11.7 million will be exempt. For instance, if you receive an inheritance of $15 million, the federal income tax rate will only apply to $3.3 million of your inheritance. Because the taxable income of $3.3 million is over $1 million, it will be taxed at the maximum federal income tax rate of 40%, so you will receive $11.7 million tax-free inheritance, and 60% of the remaining $3.3 million. In addition to understanding the federal income tax, another caveat to be aware of is that if the decedent was not a Florida resident or lived in another state, that state’s inheritance or gift taxes may apply, so it’s important to check the inheritance laws of that state or consult with an estate attorney who can assess the tax ramifications.
Planning for a Large Inheritance
If you are planning to give or receive an inheritance in excess of $11.7 million, it’s important to talk to a Florida estate attorney in order to properly plan and take advantage of the available tax laws. For instance, it can be highly beneficial to know that the $11.7 million exemption is portable for married couples, meaning that with the proper planning they can ensure that $23.4 million of their bequeathed assets are given to their intended heirs free of tax.
Talk to Larry E. Bray
If you are planning to give or receive a large inheritance in Florida, it’s important to plan ahead and get an accurate understanding of any potential state and federal tax liability. Contact the West Palm Beach estate planning lawyer Larry E. Bray to schedule a consultation today.