In addition to sunny beaches and an abundance of golf courses, Florida residents enjoy many tax advantages compared to residents of almost any other U.S. State. The most significant of these tax advantages for Florida residents are listed and described below.
No State Income Tax. The State of Florida does not have a personal Income Tax. A prohibition against such a tax was originally drafted into Florida’s Constitution in 1885. This prohibition was re-enacted in the 1968 Constitution and remains a part of Florida’s present Constitution. In order to enact a personal Income Tax, Florida’s Constitution would have to be amended. Such an action would require approval by vote of the citizens of the State of Florida.
No City Income Tax. Although various cities (such as those in the northeast) impose Local Income Taxes of their own, Florida municipalities are prohibited from doing so.
No Florida Gift Tax. Residents of a number of states (e.g., Connecticut, Tennessee, North Carolina and Louisiana) may pay state as well as Federal Tax on gifts made during their lifetimes. Florida residents pay no State Gift Tax.
No State Death Tax. Florida does not have a State Death Tax, and the credit for State Death Taxes it previously received has been abolished.
In contrast to the Florida Estate Tax Law, some states (e.g., Connecticut, Tennessee, Ohio and Pennsylvania) impose a separate tax on a beneficiary’s right to inherit or receive property.
This is sometimes known as an Inheritance Tax and results in the heirs or beneficiaries paying taxes twice, although a deduction for the State Inheritance Tax is allowed in computing the (total) Taxable Estate that will be subject to Federal Estate Taxes. (See Exhibit IV of our Firm’s Book)
For those non-residents who die owning taxable property in Florida, the tax imposed is not unlike that imposed upon the Estate of a Florida resident.
Taxable property of a non-resident decedent includes: Florida real property, tangible personal property having an actual situs in Florida, intangible personal property having a business situs in Florida, and securities of a Florida corporation.
When a Florida resident owns property (especially real property) physically located in another state, the use of a Florida partnership, Revocable (Living) Trust, Personal Residence Trust, limited liability company or closely-held Florida corporation to hold such property may avoid such property becoming subject to a State Death Tax and/or Inheritance Tax in that other state, which, as mentioned, would be in addition to the Federal Estate Tax.