It’s important for beneficiaries and those who are beginning the process of estate planning to understand the tax implications that can come with inheriting an asset in Florida. While there is no Florida inheritance tax (unless the decedent’s assets exceed the federal inheritance tax amount - which is currently $13.99 MILLION DOLLARS), there can be other tax consequences depending on the type of asset, where it was located, and what the beneficiary chooses to do with it.

Is There a Florida Inheritance Tax?

Florida does not levy an inheritance tax or an estate tax, unless the decedent’s assets exceed the $13.99 million amount. This means a beneficiary would not be taxed on the assets they receive from a loved one’s estate. In fact, the Florida state constitution explicitly prohibits both an inheritance tax and a personal income tax. The legislature would not be able to enact a tax that conflicts with the constitution without 60% approval from Florida voters.

When Can You Be Taxed on Inherited Assets?

Although there is no Florida inheritance tax, there are several situations where a beneficiary or heir might still be taxed on inherited assets. A beneficiary may be subject to taxes under the following circumstances:

• Inherited property from another state: A few states still levy an inheritance tax, including Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. If a Florida resident inherits property from one of these states, they may be subject to taxes for the asset in that jurisdiction.
• Income generated by inherited assets: In Florida, a beneficiary does not have to pay taxes on the inherited asset itself, but they may be required to pay taxes on any income that has been generated by the asset. For instance, if a beneficiary inherits real estate and uses it as a rental property, the rental income would be subject to taxes.
• Inherited retirement account distributions: While Florida does not have a state income tax, distributions from inherited retirement accounts are not taxed at the state level. However, distributions may still be subject to federal income tax, depending on the type of account.
• Capital gains taxes: If a beneficiary decides to sell an inherited asset, any profit made on it would be subject to capital gains taxes. The taxable capital gain is determined by the stepped-up basis. Simply put, this rule resets the value of the inherited asset to its fair market value on the date of the original owner’s passing. The subsequent owner would be responsible for taxes on any increase in value between the date of death and the date of sale.
• Gift taxes: Many clients ask about leaving all their assets to one person and letting that person pass out the assets as they see fit. But this can cause the nominated person to incur gift taxes themselves.

Notably, the federal government imposes an estate tax. Not to be confused with an inheritance tax which is paid by a beneficiary, an estate tax is one that is levied on the total value of the decedent’s estate and paid out of the estate assets before they can be distributed. However, it does not apply in most situations as the threshold is very high. In 2025, an estate is only subject to federal taxes if its total value exceeds $13.99 million, or $27.98 million for married couples.

How Can You Avoid Tax Consequences for Inherited Assets?

Even without a Florida inheritance tax, it’s important to take measures to avoid unintended tax consequences for your beneficiaries. The best way to do this is by creating a comprehensive estate plan that takes these matters into consideration.

An essential estate planning tool that can be used to minimize or avoid taxes is a trust. If property is owned in a state that imposes an inheritance tax, placing this asset into an irrevocable trust can allow it to pass to the beneficiary without being taxed. Since an irrevocable trust can remove assets from the taxable estate, this can also be a beneficial tool to help minimize federal estate taxes for those with very large estates.

For beneficiaries, it’s important to be strategic about timing when it comes to selling an inherited property in order to reduce the tax consequences. Significantly, selling a property quickly after inheriting it can help minimize capital gains taxes since there would be less time for the asset to appreciate in value. In other words, if the property is sold shortly after being inherited, the sale price would be very close to the stepped-up basis. This would result in little or potentially no capital gains tax.