Most people know nothing about inheritance taxation until they become responsible for the “Death Tax” due. And while Florida does not have a state-level inheritance tax, its residents may still have to face some fiscal burden when it comes to passing their legacy or receiving an heirdom.
In this article, we shall talk about how the Inheritance taxes work in Florida, when a Florida resident will have to pay the “Death Tax” anyway and how anyone can reduce the taxable part of their estate using Federal Tax exemptions.
Inheritance and Estate taxes for Florida residents
Inheritance and Estate taxes, also referred to as “Death Taxes,” both apply to the inherited estate. While the estate tax is calculated and taken out from the estate`s worth before it is passed to heirs, inheritance tax is directly the heirs` responsibility.
The fact that Florida has neither inheritance nor estate taxes on the state level does not mean that the state`s residents don`t have to worry about the “Death Taxes” at all.
There are at least 2 cases when you are responsible for a tax due by all means:
- If you inherit a property located in Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania – the states that still have an inheritance tax;
- If the inherited estate`s worth exceeds the Federal Estate Tax exemption of $12,06 million.
Careful and thorough estate planning will help you reduce the taxable part of your sufficient estate in Florida and preserve it for your heirs. Moreover, Florida`s taxation laws provide a convenient and efficient tool to easily take control over the estate`s taxable part.
Gift tax helps to plan your estate in Florida
Like most other states, Florida does not levy a local gift tax. At the same time, the Federal Gift Tax Exclusion has an annual exclusion of $16,000 per donee.
It means that you can gift away up to $16,000-worth shares of your estate to as many people as you wish every year, reducing its taxable part. In this case, your gifts are not considered taxable and don`t have to be reported.
Suppose you have 3 heirs. It means that every year you can gift away up to $48,000-worth of your estate without any adverse side effects. Spouses can “double their effort” and reduce their estate by at least $96,000 per year in this case.
Payments made for education and medical treatment are also not considered taxable even if they exceed the $16,000 exemption bar. So, paying for your kids` education is both investment into their future and a way to protect their heirdom.
Gifts between spouses and donations to IRS-approved charity funds are also not considered taxable and don`t affect lifetime exemption.
Making annual gifts is a convenient and easy way to reduce the taxable part of an estate for Florida residents. Once planned thoroughly, the process will help you protect your legacy and prevent fiscal burden on your beloved ones in the future.
