When you receive an inheritance in Florida, it is essential to know whether or not you need to pay taxes on that inheritance.
In general, Florida is a tax-friendly state when it comes to inheritances, but understanding the specifics can help you plan for any potential tax implications.
No state inheritance or estate tax in Florida
One of the main benefits of living in Florida is that the state does not have an inheritance tax or a state estate tax. This means that if you inherit property or assets from someone who was a Florida resident, you will not be responsible for paying any state taxes on that inheritance.
However, it is essential to remember that this only applies to state taxes. Depending on the size of the estate and the relationship between the deceased and the beneficiary, federal estate taxes may still apply. As of 2021, federal estate tax exemptions are set at $11.7 million for individuals and $23.4 million for married couples, meaning that only estates above these thresholds will be subject to federal estate taxes.
Income tax implications of inherited assets
While there may not be any inheritance or estate taxes in Florida, you may still have to pay income tax on certain inherited assets. For example, if you inherit an Individual Retirement Account (IRA) or a 401(k) account, the IRS may require you to pay income tax on the distributions you take from those accounts.
Inherited property, such as stocks, bonds or real estate, may also have tax implications if you decide to sell them. Capital gains tax may apply when you sell inherited assets.
Educating yourself on these inheritance tax matters can help you make informed decisions and avoid any potential financial surprises.