Does Florida Have an Inheritance Tax or Estate Tax?

Florida does not have an inheritance tax or an estate tax. The Florida Constitution caps any state estate or inheritance tax at the credit the federal government allows against the federal estate tax. That credit ended for deaths after 2004, and only a constitutional amendment approved by 60% of voters could change the cap. A person who inherits from a Florida decedent owes no Florida inheritance tax, regardless of amount.

The federal estate tax still applies to very large estates. The One Big Beautiful Bill Act, signed into law on July 4, 2025, set the federal estate tax exemption at $15 million per person ($30 million for married couples) beginning January 1, 2026. The exemption is indexed for inflation and has no sunset provision. The top federal estate tax rate remains 40%.

What Is the Difference Between an Inheritance Tax and an Estate Tax?

An estate tax is paid by the deceased person’s estate before assets pass to beneficiaries. An inheritance tax is paid by the person who receives the inheritance after distribution. “Death tax” is an informal label for both. Florida imposes neither.

Five states currently impose an inheritance tax, and others impose a state estate tax. Florida also has no state income tax on individuals. The combination makes Florida one of the most favorable states for transferring wealth to the next generation.

Federal Estate Tax

The federal estate tax applies to every U.S. citizen or resident whose estate exceeds the exemption amount at death. The taxable estate includes all assets the person owned or controlled, including individually held property, property in a revocable living trust, life insurance proceeds where the decedent held incidents of ownership, retirement accounts, and the decedent’s share of jointly held property.

A single individual can pass up to $15 million at death without owing any federal estate tax. Married couples can shield $30 million through portability—the surviving spouse files IRS Form 706 to claim the deceased spouse’s unused exemption. The deadline is nine months after death, plus a six-month extension. An estate too small to require a return gets more time: the IRS allows a late portability-only filing up to five years after death under a simplified procedure. Waiting past five years means requesting a private letter ruling, an expensive process the IRS can deny.

At that exemption level, only a very small fraction of estates nationwide owe any federal estate tax. The vast majority of Florida residents will never face a federal estate tax liability.

Stepped-Up Basis on Inherited Assets

Inherited assets receive a stepped-up cost basis, which resets each asset’s value to fair market value on the date of death. Capital gains that accumulated during the decedent’s lifetime are eliminated. The rule comes from IRC § 1014 and covers most inherited property, but not income the decedent earned and never paid income tax on—what the tax code calls income in respect of a decedent. That is why an inherited traditional IRA or 401(k) gets no step-up and its distributions are taxed as ordinary income.

For example, suppose a parent bought a home for $200,000 and the home is worth $600,000 when the parent dies. The child who inherits the property takes a $600,000 cost basis. If the child sells at that price, no capital gains tax is owed. Without the stepped-up basis, the child would owe capital gains tax on $400,000 of appreciation.

The stepped-up basis applies to inherited real estate, stocks, mutual funds, and business interests. The One Big Beautiful Bill Act preserved the stepped-up basis without modification. For most Florida families, the stepped-up basis provides more practical tax savings than the estate tax exemption because it applies to every estate regardless of size, while the estate tax exemption saves tax only for estates exceeding $15 million.

A lady bird deed preserves the stepped-up basis because the property remains in the owner’s gross estate under IRC § 2036. A lifetime gift, by contrast, carries over the donor’s original cost basis, eliminating the stepped-up basis and potentially creating a large capital gains tax liability for the recipient.

Do Beneficiaries Pay Taxes on Inherited Assets?

Florida beneficiaries do not owe Florida inheritance tax on any amount they receive. Inherited assets may, however, generate taxable income after the inheritance is received.

Inherited retirement accounts (traditional IRAs, 401(k) plans) generate taxable income when distributions are taken. Non-spouse beneficiaries must generally distribute the entire inherited retirement account within ten years of the original owner’s death under the SECURE Act. Each distribution is taxed as ordinary income in the year received. A large inherited IRA distributed over ten years can push a beneficiary into a higher income tax bracket for each year distributions are taken.

Inherited real estate that is rented generates rental income subject to federal income tax. Inherited investments that pay dividends or interest generate taxable income. If a beneficiary sells inherited property for more than its stepped-up basis, the gain is subject to capital gains tax.

The inheritance itself is not taxed in Florida. The income that inherited assets produce after receipt is subject to federal income tax under normal rules.

Does a Living Trust Reduce Estate Taxes?

A standard revocable living trust does not reduce federal estate taxes. Assets in a revocable trust are included in the grantor’s taxable estate because the grantor retains the power to revoke or amend the trust during their lifetime. The trust avoids probate, provides privacy, and allows incapacity planning, but it does not remove assets from the taxable estate.

For estates exceeding the $15 million exemption, irrevocable trusts can reduce estate tax liability by transferring assets out of the taxable estate during the grantor’s lifetime. Common structures include:

• Irrevocable life insurance trusts (ILITs) remove life insurance proceeds from the taxable estate entirely.
• Spousal lifetime access trusts (SLATs) allow married couples to transfer assets while retaining indirect access through the other spouse.
• Intentionally defective grantor trusts (IDGTs) freeze the value of transferred assets for estate tax purposes while the grantor continues paying income tax on trust earnings.

These strategies require careful planning and are typically relevant only for estates above the exemption: $15 million for an individual, $30 million for a married couple. For the vast majority of Florida residents, a revocable living trust paired with proper beneficiary designations and a lady bird deed accomplishes every practical estate planning goal without irrevocable trust complexity.

Gift Tax and Lifetime Transfers

Florida does not impose a state gift tax. The federal gift tax is unified with the estate tax—the $15 million lifetime exemption covers taxable gifts made during life plus the estate’s value at death. Each person can also make annual exclusion gifts of $19,000 per recipient per year (2026) without using any lifetime exemption.

Certain transfers do not count against the lifetime exemption at all. Gifts between spouses qualify for an unlimited marital deduction. Charitable donations are fully exempt. Tuition payments made directly to an educational institution and medical expenses paid directly to a healthcare provider are excluded regardless of amount.

Gifts made during life carry over the donor’s cost basis rather than receiving a stepped-up basis. For appreciated assets, the recipient may owe capital gains tax on the donor’s original gain when the asset is eventually sold. In most cases, holding appreciated assets until death and allowing the stepped-up basis to eliminate the embedded gain is more tax-efficient than making lifetime gifts of those assets.

Which States Tax Inheritances or Estates?

Five states impose an inheritance tax: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Iowa completed its phase-out on January 1, 2025. About a dozen states plus the District of Columbia impose an estate tax, including New York, Massachusetts, Illinois, Minnesota, Oregon, and Washington. Maryland is the only state that imposes both.

A Florida resident who dies owning property in a state that imposes an estate tax may owe tax to that state on the property located there. If a Florida resident owns real estate in New York, for example, the New York estate tax may apply to the value of that property. Holding out-of-state property in a living trust or LLC can sometimes reduce or eliminate this exposure depending on the state’s rules.

State inheritance taxes attach based on where the decedent lived and where the property sits, not on where the beneficiary lives. All five states tax property passing from their own residents’ estates and in-state property of nonresidents. A Florida resident who inherits a Nebraska farm can owe Nebraska inheritance tax, while a New Jersey resident who inherits a Florida home owes New Jersey nothing. Where the tax applies, the rate depends on the heir’s relationship to the decedent, and spouses and close family pay the lowest rates or nothing.

Florida residents who recently moved from states with estate or inheritance taxes should confirm that they have established Florida domicile and that their former state does not still claim them as a resident for tax purposes. Maintaining voter registration, a driver’s license, or a primary mailing address in the former state can create dual residency claims.

How Is Property Inherited in Florida?

When a house or other real property is inherited in Florida, the new owner assumes all legal responsibilities for the property. If the new owner plans to occupy the home as a primary residence, they may qualify for the Florida homestead exemption, which provides property tax benefits and creditor protection under the Florida Constitution.

The property receives a stepped-up basis to fair market value at the date of death. If the new owner sells the property at or below that value, no capital gains tax is owed. If the property appreciates further after the date of death, capital gains tax applies only to the post-death appreciation.

Inherited property that passes through probate may be subject to creditor claims against the estate during the probate process. Passing property outside probate does not always escape those claims—Florida law requires the trustee of a decedent’s revocable living trust to cover the estate’s obligations if the probate estate cannot. A homestead that passes to the surviving spouse or heirs, by contrast, keeps its constitutional protection from the decedent’s creditors.