Do You Pay Inheritance Tax in Florida?

Florida’s Stance on Inheritance and Estate Taxes

Florida does not impose a state-level inheritance tax. An inheritance tax is typically levied on the beneficiary who receives assets from a deceased person’s estate. Individuals inheriting property or funds in Florida are not subject to this state tax.

Florida also does not levy its own estate tax. An estate tax is a tax on the deceased person’s total taxable estate before assets are distributed to heirs. Historically, Florida had a “pick-up” tax, which was tied to the federal estate tax, allowing the state to collect a portion of the federal tax. However, this state-level estate tax was phased out for decedents dying on or after January 1, 2005, due to changes in federal law.

For residents of Florida, or for estates probated within the state, the absence of these state-specific transfer taxes can be advantageous. Other tax considerations may still apply to inherited assets or the deceased’s estate at the federal level.

Federal Estate Tax Considerations

While Florida does not impose its own estate tax, the federal government levies an estate tax on large estates. This tax is governed by Internal Revenue Code Section 2001 and is imposed on the value of the deceased person’s total taxable estate, not on individual beneficiaries. Only estates exceeding a specific exemption amount are subject to this federal tax.

For individuals dying in 2025, the federal estate tax exemption is $13.99 million. Any portion of the estate above this exemption amount is subject to taxation, with the top federal estate tax rate being 40%.

The executor or personal representative of an estate that exceeds the federal filing threshold must file IRS Form 706, “United States Estate (and Generation-Skipping Transfer) Tax Return.” This form reports the estate’s assets and calculates any federal estate tax liability. Recent legislation permanently raises the federal estate tax exemption to $15 million per individual starting in 2026.

Income Tax Implications for Inherited Assets

Generally, the direct receipt of inherited property, such as cash, real estate, or stocks, is not considered taxable income to the beneficiary for federal income tax purposes. This exclusion is provided under Internal Revenue Code Section 102. The value of the assets itself is typically not subject to income tax when it is received by an heir.

A significant tax benefit for inherited assets is the “step-up in basis” rule. For most inherited assets, the cost basis for the beneficiary is adjusted to the fair market value of the asset on the date of the decedent’s death. This adjustment often minimizes or eliminates capital gains tax if the beneficiary sells the asset shortly after inheriting it, as the gain is calculated from this stepped-up value.

However, income generated by inherited assets after they are received by the beneficiary is generally taxable. For instance, dividends from inherited stocks, interest from inherited bank accounts, or rental income from inherited real estate are all subject to income tax. Distributions from inherited retirement accounts, such as IRAs or 401(k)s, are also typically taxable as ordinary income to the beneficiary.

When distributions are taken from an inherited retirement account, the beneficiary will usually receive IRS Form 1099-R from the financial institution. This form reports the total distribution amount, and the taxable portion must be included in the beneficiary’s annual income tax return. While the distribution itself is taxable, it is generally exempt from the 10% early withdrawal penalty that might apply to the original owner.