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Whether you are planning out how to distribute your estate after your passing or you stand to receive a large inheritance in Florida, you may be wondering, Does Florida have an inheritance tax? This is an important and relevant question to ask no matter which side of the equation you are on. Read on to learn more about how estates and inheritances are taxed in Florida, along with answers to related questions you might not even have thought about. For help with customized estate planning that meets your needs and goals in South Florida, contact Shalloway & Shalloway, P.A., for advice and assistance from a team of experienced and dedicated West Palm Beach estate planning attorneys.
Let’s get straight to the point – Florida does not have an inheritance tax. This fact often comes as a pleasant surprise to those who inherit property or money in the state. Whether you are a resident or a non-resident beneficiary, you will not have to pay any state-level inheritance tax.
While there is no inheritance tax, if you inherit property in Florida, you may wonder, “Do I have to pay taxes on inherited property?” Generally, you are not responsible for the deceased’s debts or taxes. However, if the property you inherit generates income (for example, through rent), you will be required to pay income tax on that.
Another common concern is whether beneficiaries pay taxes on inherited money in Florida. Again, there’s no state-level inheritance tax. But if the money you inherit gains interest or dividends, that income is typically taxable. Always consult a tax professional or estate planning lawyer to understand your responsibilities better.
Another common question people ask is whether they have to report inheritance money to the IRS. The answer, generally, is no. However, there are exceptions, such as if you earn income from the inherited property or money, or if you inherit a retirement account, as certain withdrawals might be subject to income tax.
What happens when you inherit a house in Florida? Beyond potential income tax implications, there are other considerations such as property taxes, maintenance costs, and homeowners insurance. You may decide to live in, rent out, or sell the property. Each choice carries different financial and legal implications, highlighting the importance of sound estate planning advice if you are planning to leave your home to your heirs.
Briefly stepping away from Florida-specific laws, let’s discuss the federal estate tax, which applies irrespective of the state you’re in. As of 2023, the federal estate tax applies to estates exceeding $12.92 million in value. This amount can also be doubled for married couples who engage in proper estate planning, so the federal estate tax is only a concern for the very wealthy. When the tax does apply, though, it is considerable, ranging from 18% to 40% of the taxable value of the estate.
The federal estate tax is paid by the estate before the beneficiaries receive their inheritance, not by the beneficiaries themselves. The exemption amount is adjusted annually for inflation, so always check the latest IRS guidelines or consult with a professional.
Among its many positive features, Florida’s lack of an inheritance tax can make it an attractive place for retirees and individuals seeking effective estate planning. At Shalloway & Shalloway, P.A., we’re dedicated to helping you navigate the intricate details of estate planning in West Palm Beach, Florida, ensuring your peace of mind for the future. Remember, while inheritance may not be taxed, income generated from your inheritance might be, and federal taxes can apply depending on the estate’s value. For any further information, don’t hesitate to contact us at 561-686-6200 to discuss your needs and goals.