Florida does not have a state inheritance tax or estate tax
If you inherit money or property in Florida, you will not owe Florida state tax on that inheritance. Florida is one of twelve states with no inheritance tax and no estate tax. This applies whether you live in Florida, the person who died lived in Florida, or both.
However, the absence of a Florida tax does not mean the inheritance is tax-free everywhere. The federal government taxes large estates, and if you inherit from someone who lived in another state, that state's tax may still explore to you. The key distinction is that Florida itself will not take a cut.
Key Takeaways
- Florida has no state inheritance tax or estate tax, so inheriting money or property does not trigger a Florida state tax bill.
- The federal government taxes estates over a certain threshold, which varies by year; this is separate from Florida state tax.
- If the person who died lived in a state with an inheritance or estate tax, that state may tax the inheritance even if you live in Florida.
- Income earned by an inherited asset after you receive it — such as rental income or investment gains — is taxable in Florida and federally.
- The executor or administrator of the estate handles federal estate tax; you as the beneficiary typically do not file a separate inheritance tax return in Florida.
How federal estate tax differs from state inheritance tax
State inheritance taxes and federal estate taxes are two separate systems. An inheritance tax is paid by the person receiving the money or property. An estate tax is paid by the estate itself before distribution to heirs. Florida has neither, but the federal government has an estate tax.
The federal estate tax applies only to estates above a certain value. That threshold is set by Congress and changes periodically. In 2024, the federal exemption is $13.61 million per person. Estates below that amount owe no federal tax. Estates above it owe tax on the excess, at rates up to 40 percent. The executor of the estate files Form 706 (the federal estate tax return) with the IRS if the estate is large enough to require it.
Because Florida has no state estate tax, even a very large Florida estate pays only federal tax, not both. This is one reason Florida is attractive to people with substantial assets.
What happens if the deceased lived in another state
If the person who died lived in a state with an inheritance tax or estate tax, that state may tax the inheritance even if you now live in Florida. The tax is based on where the deceased lived at death, not where you live as the beneficiary.
States with inheritance taxes include Iowa, Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania, and Tennessee. States with estate taxes include Connecticut, Delaware, Hawaii, Illinois, Maine, Massachusetts, Minnesota, Mississippi, New York, Oregon, Rhode Island, Vermont, and Washington. Some states have both. If the deceased lived in one of these states, the estate will owe that state's tax before you receive your share.
You do not pay this tax yourself; the executor deducts it from the estate before distributing assets to heirs. But it reduces what you inherit. If you are unsure whether the deceased lived in a state with an inheritance or estate tax, ask the executor or attorney handling the estate.
Income tax on inherited assets after you receive them
Inheriting an asset is not a taxable event in Florida. But income generated by that asset after you inherit it is taxable. This is an important distinction that catches many people off guard.
If you inherit a rental property, the rent you collect is taxable income. If you inherit a brokerage account with stocks, any dividends or capital gains you realize when you sell are taxable. If you inherit a savings account, interest earned after the date of death is taxable income to you. Florida does not tax this income, but the federal government does, and you report it on your federal tax return.
One exception: assets receive a "step-up in basis" at death. This means if you inherit stock worth $100,000 that the deceased bought for $20,000, your cost basis is $100,000, not $20,000. If you sell it when ready for $100,000, you owe no capital gains tax. This step-up applies to most inherited assets and is a significant tax benefit, but it applies only to the value at death, not to gains after you inherit.
When you need to file a return for an inherited estate
If you are the executor or administrator of an estate, you may need to file a federal estate tax return (Form 706) even if no tax is owed, depending on the estate's size. You will not file a Florida inheritance tax return because Florida does not have one.
If you are a beneficiary receiving an inheritance, you do not file a separate return for the inheritance itself. However, if the inherited asset generates income — rent, interest, dividends, or capital gains — you report that income on your own federal tax return in the year you receive it.
The executor should provide you with a Form K-1 (if the estate is a trust or partnership) or other documentation showing your share of any income the estate earned before distribution. Keep records of the date you inherited each asset and its value on that date, as you will need this for calculating capital gains tax if you later sell.
Why some people move to Florida for tax reasons
Florida's lack of state income tax, combined with no inheritance or estate tax, makes it attractive to retirees and people with significant wealth. However, moving to Florida for tax reasons requires establishing Florida residency, which means more than just owning property there.
Florida considers you a resident if you are domiciled there — meaning you intend to make it your permanent home and you spend enough time there to demonstrate that intent. The state looks at factors like where you vote, where you hold a driver's license, where your family lives, and where you maintain a home. If you split time between Florida and another state, the other state may argue you are still a resident there and owe state income tax.
This matters for inheritance because if you die while a resident of another state, that state's estate or inheritance tax may explore to your estate, even if you owned property in Florida. Establishing clear Florida residency before death is important if tax planning is part of your reason for moving.
Frequently Asked Questions
Do I owe Florida tax if I inherit money from someone who lived out of state?
No, Florida will not tax the inheritance. However, the state where the deceased lived may tax it. If they lived in a state with an inheritance or estate tax, that state's tax applies to the estate before you receive your share. The executor handles this; you do not pay it directly.
Is the step-up in basis the same thing as avoiding inheritance tax?
No. The step-up in basis is a federal rule that resets the cost basis of inherited assets to their value at death. It reduces capital gains tax if you sell the asset later, but it is not the same as avoiding inheritance tax. Florida has no inheritance tax to avoid, but the step-up is a separate federal benefit that applies regardless.
If I inherit a house in Florida, do I owe property tax on it?
You owe property tax on any real estate you own in Florida, inherited or not. Property tax is separate from inheritance tax. The county assessor will reassess the property's value after it transfers to you, and your tax bill may change. You do not owe tax on the inheritance itself, but you do owe ongoing property tax on the house.
What if the estate is very large — over $13 million?
The federal estate tax applies to estates over the federal exemption threshold. In 2024, that threshold is $13.61 million per person. The executor files Form 706 with the IRS and pays federal tax on the excess. Florida does not add a state tax on top of this. The federal tax is paid from the estate before heirs receive their shares.
Do I need to report inherited money to the IRS?
You do not report the inheritance itself to the IRS. However, if the inherited asset generates income after you receive it, you report that income on your tax return. Keep documentation of the inheritance date and the asset's value at that time, as you will need it for calculating capital gains if you sell later.