Do I Have to Pay Taxes on Inheritance in Florida?
If you are planning to leave a large inheritance in Florida or are expecting to receive one, you may be concerned about the potential tax liability. Many states impose steep taxes on inheritance, including estate taxes, inheritance taxes, gift taxes, or even counting it as taxable income. Just thinking about it is enough to give most people a massive headache. Lucky for you though, Florida is one of the most tax-friendly states in the country. It should also be noted that taxes are paid out of the inheritance prior to it being distributed, so the burden of determining tax liability generally falls on the testator (and their attorney) rather than on the recipient. However, having an understanding of potential tax liability can help you get an accurate estimate of your expected inheritance.
Is There an Inheritance Tax in Florida?
In short, no. Florida does not impose an inheritance tax, nor does it impose an estate tax or gift tax on inheritance. Because Florida has no income tax (even on pensions, social security, and retirement accounts), inheritance is not even taxable as income for Florida residents. It is arguably one of the best states in the country for giving or receiving a large inheritance.
Federal Inheritance Tax
While Florida does not have an inheritance tax, there is a federal inheritance tax. However, this tax only applies to large estates in excess of $11.7 million. Any amount up to $11.7 million is exempt from the federal estate tax, so the federal tax only applies to the portion of the inheritance in excess of $11.7 million. For example, if you were to receive a $13.7 million inheritance, the first $11.7 million of your inheritance would be tax free, and only the remaining $2 million in excess of that amount would be subject to the federal inheritance tax. The federal inheritance tax is graduated, meaning that the larger the amount of money in excess of $11.7 million, the higher the rate at which it is taxed. The lowest tax rate, applying to excess amounts of $1 – $10,000 is 18%, while the maximum tax rate, applying to excess amounts of $1 million or more is 40%. In the above example, you would receive $11.7 million of your inheritance tax free, and 60% of the $2 million in excess of that amount, with 40% of the $2 million going to federal inheritance taxes.
Planning for a Large Inheritance
If you are planning to leave an inheritance in excess of $11.7 million, planning is critical. Working with an estate planning attorney could save your estate and your beneficiaries millions of dollars. For instance, the $11.7 million exemption is actually portable for married couples, so if you plan accordingly with the help of an attorney, you and your spouse can cumulatively claim an exemption of $23.4 million after both spouses have passed away.
Schedule a Consultation with the SG Law Firm
If you are planning your inheritance, it’s important to consider tax liability and the impact it may have on what is ultimately inherited by your beneficiaries. The experienced estate planning attorneys at the SG Law Firm in Miami, Florida can work to help protect and maximize your estate. Contact us today to schedule a consultation.