It’s fairly common for people to come talk to us about concerns they have about possibly having to pay taxes if they receive an inheritance in Florida. Any time you receive money or property, considering the potential tax implications is always a wise thing to do. Even if you unwittingly make a mistake and forget to pay taxes, or don’t realize that taxes applied in your particular situation, you can set yourself up for some serious legal headaches down the road.
So when people receive an inheritance in Florida, they should always speak to a tax or estate planning professional as soon as possible. Until then, here are some general principles you should know about receiving inheritances in Florida.
You won’t have to pay estate taxes on an inheritance in Florida.
An estate tax is a kind of tax that applies to the property left behind by a deceased person. That property, known as the estate, can have to pay a portion of its value as a tax. However, most estates are not subject to an estate tax for variety of reasons.
First, very few states impose an estate tax. Only a handful of states currently have estate taxes on the books, and Florida is not one of them.
Second, the federal estate tax allows for significant exemptions that effectively mean that only the largest estates will have to pay an estate tax.
Third, you don’t have to pay the estate tax as someone who received an inheritance. Instead, it falls to the estate administrator to pay that tax before distributing the inheritances.
You don’t have to pay inheritance taxes on an inheritance in Florida.
An inheritance tax is a tax levied against the property someone receives as an inheritance. A very small number of states have inheritance taxes, and again, Florida is not one of them.
However, it’s important to point out that with estate and inheritance taxes, these taxes could apply to the property you receive as an inheritance if that property is located in a state that imposes one of these taxes. Your attorney will explain which states have them, and how much of the tax burden they impose.
You don’t have to pay income taxes on an inheritance in Florida.
As a general rule, inheritances are not considered income, and will not expose you to additional state or federal income tax. However, there is a significant exception to this. If you receive a traditional IRA or 401(k) plan, the distributions you take out of those plans will be counted when you have to tabulate your federal or state income tax return. Again, you should speak to your attorney for more information if this situation applies to you.