What to Know About the Florida Intangible Tax
Gain clarity on Florida's former annual tax on intangible property and distinguish it from the separate, nonrecurring tax still levied on mortgages today.
Florida once levied a tax on certain financial assets known as the Intangible Personal Property Tax. This was an annual tax calculated on the value of intangible assets held by individuals and certain entities within the state. It functioned as a form of wealth tax, targeting assets that were not physical but still held significant value.
Effective January 1, 2007, the annual intangible tax was officially repealed for individuals, trusts, and partnerships. This change meant that for the 2007 tax year and all subsequent years, taxpayers were no longer required to file an intangible tax return or pay tax on assets like stocks and bonds.
Taxable Intangible Assets
The scope of the annual intangible tax was specific, covering a defined list of financial instruments. Assets subject to the tax included stocks, bonds, mutual funds, and money market funds. It also encompassed notes receivable not secured by real estate and the beneficial interests individuals held in trusts. The market value of a person’s investment portfolio, including shares in corporations and various fund types, was part of the tax base.
Certain assets were explicitly exempt from this annual tax. A primary exemption was for any interest held in a Florida-based partnership. Other exempt assets included money, U.S. government bonds, and notes that were already secured by mortgages on Florida real property, as these were subject to a different tax.
The law also provided exemptions for interests in various business structures. Ownership in general partnerships, limited liability partnerships, and limited partnerships were not included in the taxable base. In contrast, membership interests in limited liability companies (LLCs) and shares of corporate stock were taxable, which influenced how business owners structured their entities.
Historical Filing and Calculation
To comply with the tax, Florida residents and corporations were required to file an annual return if the value of their taxable assets exceeded certain thresholds. The primary document for this process was the Annual Intangible Personal Property Tax Return, Form DR-601I for individuals and Form DR-601C for corporations. On this form, taxpayers reported the value of all their taxable intangible assets as of January 1 of the tax year, and the due date was June 30.
The tax calculation was based on a straightforward formula. While the tax was historically levied at a rate of 1 mill ($1 per $1,000 of value), its final rate in 2006 was 0.5 mills, or $0.50 for every $1,000 of value. Before this rate was applied, taxpayers could reduce their taxable base through specific exemptions.
Individuals were granted a $250,000 exemption, and married couples filing a joint return received a $500,000 exemption. This meant that a couple would only pay tax on the value of their intangible assets that exceeded half a million dollars. After summing the total value and subtracting the applicable exemption, the remaining amount was multiplied by the tax rate to arrive at the final tax liability.
The Repeal and the Nonrecurring Tax
The repeal of the annual intangible tax on January 1, 2007, eliminated the yearly filing requirement for individuals, partnerships, and trusts on holdings like stocks and bonds. It is important to distinguish the repealed annual tax from a separate, and still active, tax: the Florida Nonrecurring Intangible Tax. This tax is not based on the annual holding of assets but is a one-time charge levied on financial obligations secured by mortgages or other liens on Florida real property.
It applies to instruments like promissory notes and bonds that are backed by real estate within the state. This tax is paid when the mortgage or lien is recorded, typically as part of the closing process for a real estate loan. The nonrecurring tax is calculated at a rate of 2 mills, or $2 for every $1,000 of the obligation’s value.
The continued existence of this nonrecurring tax means that while the annual burden on investment portfolios is gone, certain real estate financing transactions in Florida still carry a state intangible tax liability.