An Overview of Florida State Taxes
Florida is one of nine states in the U.S. that does not have an income tax. The favorable tax climate is one of the reasons why Florida is a popular retirement destination. Businesses still pay corporate taxes, residents are responsible for taxes related to their real estate, and they still need to file federal income tax returns. Also, consumers in Florida pay sales taxes that usually include both state and local components.
You need to understand the nuances of Florida’s tax laws and also file federal returns as required by U.S. law. Failing to file taxes accurately can lead to interest charges, penalties, and even criminal prosecution.
If you understand your tax obligations in Florida, handling tax season can be quite straightforward.
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Florida Income Tax
Though Florida residents do not have to pay state income tax, they do need to file federal returns.
Nine U.S. states do not charge income tax. These states typically earn tax revenue in other ways. Some of Florida’s other taxes are well above the national average. For example, Florida has a “bed tax,” also known as a Tourist Development Tax. This tax is a fee that gets added to hotel rooms and short-term rentals. The goal is to get tax revenue from Florida’s huge tourism industry.
Florida residents do not have to pay the bed tax unless they stay in a hotel, but they do have to pay sales tax, which ranges from 6% to 8.5% of the purchase price.
Other taxes, such as a tax between 7.44% and 11.44% on cell-phone coverage and various telecommunication services, are high compared to the national average. Also, at a rate of 19.5% of the price per gallon, Florida has the fourth-highest gas tax in the country.
Florida Intangible Personal Property Tax
Florida no longer charges a tax on intangible personal property. The state repealed this tax in 2007, though it had already been gradually declining and was a tiny portion of state tax revenue in 2007. Many investors in Florida used legal tax shelters to avoid paying taxes on their investment revenue.
As its name suggests, intangible property is the property that you cannot physically see or touch. The most obvious examples are stocks, retirement plans, and bonds. Though you do not have to pay taxes on this form of property in Florida, you still need to pay federal capital gains taxes when you sell stocks or other securities.
These tax breaks are beneficial for investors and people with retirement accounts. Some states, such as New York and California, have higher capital gains taxes on intangible investments, while the other states without income tax typically offer the best tax terms for investors.
Florida Sales Taxes
The state sales tax in Florida is 6%. This tax covers most consumer products, including clothes, electronics, furniture, and most other consumer goods. In addition to the 6% sales tax, which retailers usually collect at the point of sale, counties and municipalities can add additional sales taxes. These vary by county but reach as high as 2.5%. Therefore, the total sales tax in some Florida counties is 8.5%.
Florida charges 4% on “amusement machine receipts” and 6.95% on electricity.
Some items are exempt from sales taxes. For example, groceries and prescription medications do not have sales taxes. Uniquely, you do not have to pay sales tax when you purchase the U.S. flag or Florida state flag from a retailer.
The county portion of sales tax is known as a “discretionary sales surtax.” Some counties choose not to impose additional sales taxes, while others do at a rate of up to 2.5%. However, the rate varies by county. The tax applies to both retailers who sell within the county and online retailers who deliver goods to the people or businesses within the county.
Florida Property Taxes
Florida property taxes get administered at the county level, so rates can be slightly different depending on where you live. These taxes, also known as “ad valorem taxes,” are a significant source of income for local governments and schools.
According to USA Today, the average effective property tax rate in Florida is 0.99%. This rate can vary by county. For example, Miami Dade County charges an effective property tax rate of 1.04%. If you own a home in Miami Dade worth $600,000, you pay $6,240 in taxes annually.
Property owners can find information from local property tax assessors on the Florida Revenue website. You could also look at the Florida Ad Valorem Tax Valuation and Data Book. Property owners file their taxes with the relevant county assessor.
Like many states, Florida has a homestead exemption. This tax break is for people who own a property that they use as a primary residence. The benefit can also apply to a home that you own where a dependent lives.
You need to file an application for the exemption, and it can cover up to $50,000 of the value of your home. The waiver does not cover taxes that go towards funding public schools.
For a homestead exemption, the first $25,000 of a home’s value is exempt. The second $25,000 is taxable, and the third $25,000 can also qualify for the exemption. Any value above $75,000 is taxable at the regular rate. Therefore, for an $85,000 home, $50,000 is exempt from taxes (the first and third $25,000 portions) and $35,000 is taxable (the second $25,000 portion and the $10,000 above the $75,000 threshold).
Florida Estate Taxes
Florida does not charge inheritance tax. It also does not charge an estate tax, though in some cases an estate could still be subject to federal estate taxes. You need to file a federal estate tax return within nine months of the death of the estate holder. For the state, you may need to file an Affidavit of No Florida Estate Tax Due to release any tax liens.
There is an exception. If the estate-holder died before January 1, 2005, when Florida eliminated its estate tax, you still need to file an estate tax return.
Tips for Filing Taxes in Florida
You file your Florida taxes at the same time as your federal returns. The due date is April 15, or the following Monday if the 15th falls on a weekend. You should ensure all your federal and state taxes have been filed by this date to avoid penalties. However, extensions are available if you submit an extension form by the initial due date. In Florida, you can file your tax returns online or via mail.
When preparing to file taxes state and federal taxes, you should collect all documents and paperwork such as W2 or 1099 forms, business receipts, and bank statements. You can keep these documents on file in case of an audit.
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This post was updated January 30, 2020. It was originally published January 30, 2020.