Omar Bennett
Florida has one of the lowest tax burdens in the country, with no income tax, estate tax, inheritance tax, or gift tax. The state constitution prohibits certain taxes, and Floridians are protected from the state imposing new taxes or raising existing ones. So, which taxes are prohibited by the Florida Constitution?
| Characteristics | Values |
|---|---|
| Personal income tax | Not permitted |
| Estate tax | Not permitted |
| Inheritance tax | Not permitted |
| Gift tax | Not permitted |
| Corporate income tax | 5.5% |
| Sales tax | 6% |
| Property tax | Average annual rate of 0.86% |
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What You'll Learn
Florida has no income tax
Florida is one of the few states in the US that does not levy a personal income tax. The state constitution prohibits such a tax, and Floridians are protected from the state imposing new taxes or raising existing ones without a two-thirds supermajority in the state House of Representatives and state senate. While individuals are not subject to income taxes, businesses in Florida must file a corporate income tax return, with a rate of 5.5%.
Florida's lack of income tax is offset by other taxes, including sales and property taxes. The state sales tax rate is 6%, with an additional 1.5% that can be charged by counties, making the total sales tax cap 7.5%. The average local sales tax rate is 1%, bringing the state's combined average rate to 7%. Florida also has a relatively low property tax rate of 0.86% for homeowners, which equals about $1,759 annually. There are also several exemptions and discounts available to decrease the burden on residents, such as the homestead property exemption for permanent residents or their dependents, which is $50,000. Widows or widowers are eligible for a $500 exemption, while totally and permanently blind or disabled individuals with gross income below the threshold are entitled to a full exemption.
The absence of income tax in Florida makes it attractive for retirees, as they benefit from tax-free pensions and retirement pay. Additionally, there is no state tax on Social Security or investment income. Florida has also abolished its estate, inheritance, and gift taxes, making it appealing for families looking to build generational wealth.
The state's low-tax burden is partly due to its low spending per capita and fewer state employees per capita compared to other states. Florida's prominent tourism industry also contributes to its tax revenue, as hotels, restaurants, and attractions provide funding from non-Florida residents.
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No estate, inheritance or gift tax
Florida is considered a tax haven by some due to its low sales taxes, property taxes, and corporate income taxes. Notably, Florida does not levy an estate, inheritance, or gift tax.
Estate and inheritance taxes are imposed when someone receives property or an inheritance from a deceased person. A gift tax, on the other hand, is levied when someone transfers property or money to another living person. Florida's lack of these taxes makes it attractive for beneficiaries and families looking to build generational wealth.
The absence of estate and inheritance taxes, coupled with the absence of income tax, makes Florida appealing to wealthy individuals seeking to reduce their tax liability. Many individuals relocate to Florida from states with significant inheritance taxes.
While Florida does not impose estate, inheritance, or gift taxes on its residents, beneficiaries may still be subject to federal estate and inheritance taxes. Federal estate taxes may apply if the value of the estate exceeds the exemption limit or if the property is located in a state with an estate tax.
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Sales tax exemptions
Florida's sales tax is imposed on services and goods, with the state levying a 6% sales tax rate and counties able to charge an additional 1.5%, making the total sales tax cap 7.5%.
There are, however, some exemptions to this sales tax in Florida. Groceries, prescription drugs, and fertilizers are exempt from sales tax. There are also additional excise taxes on certain goods and services, such as fuel tax.
Florida offers sales tax exemptions to manufacturers. New machinery, equipment, repair parts, and labor are all exempt from sales tax. Utilities, including electricity and natural gas, consumed in production are also exempt.
Florida also has sales tax exemptions for custom software. Electronically transferred or web-based software is not considered tangible personal property and is therefore exempt from sales tax.
Other sales tax exemptions in Florida include:
- Charges for services rendered by radio and television stations, including line charges, talent fees, and license fees.
- Fuels used by public or private utilities in the generation of electric power or energy for sale, with some exceptions for motor fuels and diesel fuels.
- One exemption for a refund of previously paid taxes for the rehabilitation of real property for any single parcel of property, unless there is a change in ownership or a new lessor/lessee.
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Excise taxes on fuel, alcohol, tobacco
Florida is known for its low tax burden, and the state constitution prohibits certain taxes, including income tax. However, the state does impose excise taxes on fuel, alcohol, and tobacco.
Excise taxes are levied on specific goods and services, and in Florida, these include motor fuel (gasoline and diesel), cigarettes, and cell phone service plans. The state also collects taxes on other items like tanning salons, firearms, vehicle sales, and transportation tickets, which are similar to excise taxes.
The excise tax on gasoline in Florida is 4.00 cents per gallon, ranking it 8th highest in the country. This tax is included in the pump price at all gas stations in the state. On the other hand, the excise tax on cigarettes is $1.34 per 20 cigarettes, which is lower than 52% of the other states, ranking 26th out of 50 states.
Florida also levies special excise taxes on the sale of all types of alcohol, including specific taxes on wine, beer, and liquor (hard alcohol). The excise tax on beer is $0.48 per gallon, ranking 10th highest in the country, while the tax on wine is $2.25 per gallon, one of the highest wine taxes nationwide. The excise tax on liquor is $6.50 per gallon, higher than 60% of the other states, and it varies based on alcohol content, place of production, container size, and place of purchase.
Excise taxes in Florida are generally non-refundable, and they are not deductible on state or federal income tax returns. However, there are occasional exceptions made by the IRS for certain tax years.
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Property tax exemptions
Florida has one of the lowest tax burdens in the country, with no income tax, low sales taxes, and low property taxes. The state constitution prohibits income tax, and Floridians are protected from the state imposing new taxes or raising existing ones without a two-thirds supermajority in the state House of Representatives and state senate.
Florida's property tax is based on the market value of the property as of January 1st of that year. The average annual property tax rate is 0.86% for homeowners, which is the 25th lowest in the nation. The state offers several exemptions to reduce the burden on residents.
Homestead Property Exemption
Any person who owns and resides on real property in Florida on January 1st and makes the property their permanent residence is eligible for a Homestead Exemption of up to $50,000. The first $25,000 applies to all property taxes, including school district taxes. The additional exemption of up to $25,000 applies to the assessed value between $50,000 and $75,000 and only to non-school taxes. An additional $50,000 Homestead Exemption is available for persons 65 and over.
Exemptions for Widows and Widowers
Widows and widowers who are permanent residents of Florida and have not remarried are eligible for a $500 exemption.
Exemptions for Individuals with Disabilities
Totally and permanently blind or disabled individuals with gross income below the threshold are entitled to receive a full exemption. An exemption is also available for individuals who are legally blind, paraplegic, hemiplegic, or wheelchair-bound with limited income.
Exemptions for Veterans
Honorably discharged veterans with a service-connected total and permanent disability are eligible for a total exemption from real estate taxes on homestead property. Surviving spouses of qualifying veterans and spouses of Florida resident veterans who died from service-connected causes while on active duty are also eligible for this exemption. A veteran who is disabled, 65 or older, and owns homestead property may qualify for a property tax discount based on the percentage of disability. Members of the military deployed during the last calendar year can receive exemptions based on the percentage of time during the year they were deployed.
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Frequently asked questions
The Florida Constitution prohibits the state from collecting income tax.
Florida does not collect estate tax, inheritance tax, or gift tax.
Florida imposes sales and use tax on the sale of tangible personal property. Florida also has a corporate income tax of 5.5% for businesses incorporated in the state or earning money in the state.
County governments in Florida levy property tax, which makes up the majority of their budgets.
Yes, there are several exemptions to the property tax in Florida, including homestead exemptions, widow(er) exemptions, and senior citizen exemptions. Quadriplegics who use their property as a homestead and individuals who are legally blind and have a low income may also be exempt from property taxes.
