Florida does not have a state estate tax

Florida imposes no tax on the transfer of property when someone dies. This means that if you inherit money, real estate, or other assets from a Florida resident, you will not owe Florida state tax on that inheritance. The same applies if you are a Florida resident and leave property to your heirs — your estate will not pay a state-level tax before distribution.

The federal government does tax large estates, but that is separate from state tax. Florida's lack of a state estate tax is one reason the state attracts retirees and wealthy residents, but it does not eliminate all tax obligations on inherited property.

Key Takeaways

  • Florida has no state estate tax, so heirs do not owe Florida tax on inherited property regardless of the estate's size.
  • The federal estate tax still applies to very large estates (those exceeding $13.61 million in 2024), but most Florida estates fall below this threshold.
  • Inherited property receives a "step-up" in basis, which can reduce capital gains tax if heirs later sell the property.
  • Some inherited assets like retirement accounts and life insurance may still trigger income tax or other federal obligations when distributed.

Federal estate tax still applies to large estates

Although Florida has no state estate tax, the federal government taxes estates that exceed a certain size. For 2024, the federal exemption is $13.61 million per person. If your estate is worth more than that amount when you die, your heirs may owe federal estate tax on the excess.

This threshold changes each year and is scheduled to drop significantly in 2026 unless Congress acts. Most Florida residents' estates fall well below the federal limit, so federal estate tax does not affect them. However, if you own significant real estate, a business, or substantial investments, you should review your estate's total value with a tax professional or estate attorney.

How inherited property is taxed when heirs sell it

When you inherit property in Florida, you do not pay tax on the inheritance itself. However, if you later sell that property, you may owe capital gains tax on any increase in value since the person died.

Inherited property receives what is called a "step-up" in basis. This means the property's tax value resets to its fair market value on the date of death, not its original purchase price. If your parent bought a house for $100,000 and it was worth $400,000 when they died, your basis is $400,000. If you sell it for $410,000 a few months later, you owe capital gains tax only on the $10,000 gain, not the $310,000 increase since your parent's purchase. This step-up can save heirs substantial tax.

Retirement accounts and life insurance have their own rules

Some inherited assets do not follow the standard estate tax rules. Inherited retirement accounts — such as traditional IRAs, 401(k)s, and SEP IRAs — trigger income tax when you withdraw the money, even though the account itself was not taxed as part of the estate. The tax rate depends on your own income tax bracket and how quickly you withdraw the funds.

Life insurance proceeds paid to a named beneficiary are generally not subject to income tax. However, if the estate itself is named as the beneficiary, the proceeds become part of the taxable estate and may trigger federal estate tax if the estate is large enough. Naming individual beneficiaries on life insurance policies is usually the better approach for this reason.

What documents you need to understand your estate's tax situation

If you are settling an estate in Florida, gather the deceased person's will or trust, a list of all bank accounts and investment accounts with their values, deeds to any real estate, and statements for retirement accounts and life insurance policies. You will also need the death certificate and, if the estate is large, a professional appraisal of any real estate or valuable personal property.

The executor or personal representative of the estate should file the final federal income tax return (Form 1040) for the year of death and, if the estate is large enough, Form 706 (the federal estate tax return). Florida does not require a state estate tax return because there is no state estate tax. However, you may still need to file other state returns if the deceased person had income during the year they died.

When to talk to an estate attorney or tax professional

If the estate is worth less than the federal exemption and consists mainly of a home and bank accounts, you may not need professional help beyond a basic tax return. However, if the estate includes a business, significant investments, multiple properties, or is worth more than $5 million, an estate attorney or tax professional can help you understand your obligations and structure the distribution to minimize taxes.

An attorney can also help if there are disputes among heirs, if the will is unclear, or if you are unsure whether probate is necessary in Florida. Many estates in Florida go through probate, which is a court process that can take several months to over a year depending on the estate's complexity.

Frequently Asked Questions

Do I owe Florida tax if I inherit money from someone who lived in Florida?

No. Florida has no state estate tax, so you will not owe Florida tax on the inheritance. You may owe federal estate tax if the total estate exceeds $13.61 million in 2024, but that is a federal obligation, not a Florida one.

What is the step-up in basis and how does it help me?

The step-up in basis resets the property's tax value to what it was worth on the date of death. If you inherit a house worth $400,000 and sell it for $410,000, you owe tax only on the $10,000 gain, not on any increase in value before you inherited it. This can save you thousands in capital gains tax.

Do I have to pay tax on an inherited IRA or 401(k)?

You do not pay tax when you inherit the account, but you will owe income tax when you withdraw money from it. The amount of tax depends on your income bracket and how quickly you take distributions. Different rules explore depending on whether you are a spouse, child, or other beneficiary.

Is probate required in Florida for every estate?

No. Small estates under $75,000 may use a simplified process called summary administration. Estates with a valid revocable living trust can transfer property outside probate. An estate attorney can tell you whether probate is necessary for your situation.