A question we frequently get at our law office is how much taxes will be due when I die? Most people are surprised to find out that the answer to that question is zero. According to CNBC, only two out of every one thousand decedents in the United States will owe any type of death tax. Death tax comes in many forms but the most common are the federal estate tax, the state estate tax (in places like New York, Connecticut, Massachusetts, Illinois and Washington) or the state inheritance tax (in places like Pennsylvania, New Jersey and certain counties in Nebraska). Over the last few years, the exemption amount (the amount you can die with before some type of death tax is owed) for all of these death related taxes have increased, and many states, such as Iowa, Delaware and New Jersey, have eliminated or started to phase out this type of tax. Florida does not currently have any state level estate tax or inheritance tax that would need to be paid upon death. Florida, like many other states, is technically a pick-up estate tax state, which means that Florida would collect as a state estate tax whatever amount the federal government would give the decedent credit for paying within the state. The amount the federal government will give credit for has been zero for many years, so that effectively there is no Florida estate tax.
People who die as Florida resident owning no real estate or business in one of the seventeen states, plus the District of Columbia, where there is a state level death tax, only have to be concerned with the federal estate tax. For calendar year 2023, a Florida resident who is a U.S. citizen or resident may exempt the first $12,920,000 of his or her assets from the federal estate tax. This amount is known as the Unified Credit, which fluctuates from year to year. The federal estate tax is currently set at forty percent, so all assets over the Unified Credit amount would be taxable at this percentage. A person who is not a U.S. citizen or resident only receives a Unified Credit of $60,000, and that number has not changed in decades. All amounts over the $60,000 would be taxed at forty percent.
If federal estate taxes need to be paid, they are due nine months after the date of death. The federal estate tax return is known as an IRS Form 706. A six-month extension of time to file the return can be requested and received easily, but an extension of time to pay the estate tax is not normally available.
Having no state level death taxes make Florida an excellent state for individuals to retire to and spend their final years. As a comparison, should someone die in Massachusetts, the state level estate tax starts at estates over $1,000,000, and the estate tax rate varies between five and sixteen percent, depending upon the size of the estate. Hawaii and Washington have the highest state estate tax rate at twenty percent.
If you have questions regarding estate taxes, we encourage you to call our office and speak with one of our attorneys.