During estate settlement in Florida, a common administrative question is whether there'll be a state inheritance tax on property. The answer is no. Florida has no inheritance tax, no state estate tax, and the Florida Constitution prohibits both. Federal estate tax still applies to large estates, though, and the rules around exemption thresholds, capital gains on inherited property, and non-resident estate tax obligations are important to know.
Key Takeaways:
- Florida has no inheritance tax or state estate tax.
- Federal estate tax applies only to estates above $15 million in 2026, with rates up to 40%.
- Inherited property receives a stepped-up basis to fair market value at death, reducing capital gains.
- Non-resident aliens face a $60,000 federal exemption on U.S. property instead of $15 million.
- Elayne organizes federal filing requirements and estate forms so families can track what's needed.
Does Florida Have an Inheritance Tax?
Florida has no inheritance tax and no state estate tax. The Florida Constitution prohibits both, which means beneficiaries receiving assets from a Florida estate owe nothing to the state simply for inheriting.
That protection traces back to 2004, when Florida repealed its "pick-up tax," a levy tied to a now-eliminated federal credit. Once Congress removed that credit, Florida let the pick-up tax expire instead of replacing it with a standalone state tax. The Florida inheritance tax law was effectively settled at that point, and the constitutional prohibition keeps it that way.
Understanding the Difference Between Inheritance Tax and Estate Tax
Estate tax is assessed against the estate before any assets are distributed. The executor pays it from estate funds, so beneficiaries receive what remains after that obligation is met. Inheritance tax, by contrast, comes after distribution and is the responsibility of the beneficiary, often based on what they received and sometimes on their relationship to the person who died.
Florida has neither. The federal government does impose an estate tax on larger estates, but that obligation belongs to the estate itself, not the heirs.
Federal Estate Tax
While Florida has no state estate tax, federal estate tax still applies to large estates regardless of where the deceased lived. For 2026, the federal filing threshold is $15 million, meaning estates below that number owe nothing at the federal level. Estates above it are taxed at rates up to 40%.
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How Inheritance Tax Works by State
| State | Who Is Exempt | Top Rate |
|---|---|---|
| Iowa | Spouses, children, parents | 5% (being phased out) |
| Kentucky | Spouses, children, parents | 16% |
| Maryland | Spouses, children, parents | 10% |
| Nebraska | Spouses, parents | 15% |
| New Jersey | Spouses, children, parents | 16% |
| Pennsylvania | Spouses | 15% |
In most of these states, spouses are fully exempt and close relatives like children or parents pay reduced rates. More distant relatives and unrelated beneficiaries face the steepest taxes.
Maryland is unique in that it imposes both a state estate tax and an inheritance tax.
Do Beneficiaries Have to Pay Taxes on Inherited Property?
Beneficiaries don't owe federal income tax or Florida state tax simply for receiving an inheritance. The IRS treats inherited property as a transfer, not as income, so nothing is due at the moment of receipt.
The stepped-up basis rule makes a meaningful difference. When you inherit property, its cost basis resets to the fair market value at the date of death. If a parent bought a house for $80,000 in 1985 and it's worth $420,000 at death, your basis becomes $420,000.
Reporting Inheritance to the IRS
For most beneficiaries, inheritance doesn't appear on Form 1040 at all. There's no income to report at the moment of receipt, so no filing obligation exists simply for receiving assets.
Also, these are two forms to be aware of when an estate reaches a certain size:
Forms 706 and 8971
Form 706, the federal estate tax return, is the executor's responsibility, filed when a gross estate exceeds $15 million. Beneficiaries don't file it themselves. When Form 706 is required, Form 8971 follows, reporting each inherited asset's stepped-up basis to both the IRS and the receiving beneficiaries, so everyone is working from the same numbers if a sale happens later on. At that level of estate complexity, working with an estate attorney or CPA is certainly a sound investment.
Do You Have to Pay Taxes on Inherited Property When You Sell?
When families sell inherited property, the tax-related focus shifts from inheritance rules to capital gains rules. Florida has no state income tax, but federal capital gains tax can apply. The key factor is the stepped-up basis. Inherited property receives a new cost basis equal to its fair market value on the date of death. If the property sells for more than that stepped-up value, only the gain above it is taxable.
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Estate Tax Concerns for Non-Residents Owning Florida Property
Non-residents who own real estate in Florida face a different set of questions than Florida residents do. While Florida itself imposes no estate or inheritance tax, the federal estate tax still applies to U.S.-situated assets owned by non-resident aliens, including real property located in Florida.
How the Federal Estate Tax Applies to Non-Residents
For non-resident aliens, the federal exemption is significantly lower than the exemption available to U.S. citizens and residents. Non-resident aliens are eligible for a $60,000 federal estate tax exemption on U.S.-situated assets.
Options That May Reduce Exposure
Several strategies may help reduce or eliminate federal estate tax exposure for non-residents holding Florida property. An estate planning attorney familiar with international tax law can help determine which approaches apply to a given situation.
- Estate tax treaties: The U.S. has estate tax treaties with a number of countries that may provide a higher exemption or different tax treatment for residents of those countries.
- Holding structures: Some non-residents hold U.S. real estate through a foreign corporation or other entity. Whether this reduces estate tax exposure depends on the structure and the owner's country of residence.
- Portability and gifting: These strategies, common for U.S. residents, generally do not apply in the same way for non-resident aliens, making proactive planning even more important.
Inherited Retirement Accounts and Tax Obligations
Inherited retirement accounts work differently from inherited real estate or bank accounts.
When you inherit a traditional IRA or 401(k), the money inside has never been taxed. Withdrawals count as ordinary income in the year you take them, with no stepped-up basis and no capital gains treatment. Every dollar distributed gets taxed at your marginal rate.
Under SECURE Act 2.0, most non-spouse beneficiaries must fully empty the inherited account within 10 years of the original owner's death. Starting in 2026, the requirement goes further. If the original owner had already begun taking required minimum distributions, beneficiaries must now take annual RMDs during that 10-year window, not simply clear the account by year 10. Missing an annual RMD carries a 25% penalty on the amount that should have been distributed.
Florida Estate Tax Waiver Forms and Documentation
When a Florida estate closes, certain documentation may be needed before real property can be transferred or a deed can be recorded. Two forms from the Florida Department of Revenue handle this: Form DR-312 and Form DR-313.
Form DR-312, the Affidavit of No Florida Estate Tax Due, is used when no federal estate tax return is required. Form DR-313 is used when a federal return is filed but no Florida estate tax is owed. Both forms must be signed by the personal representative and notarized before they can be recorded with the county clerk.
These forms are not always required. They apply only when real property is part of the estate and needs to be transferred. If the estate holds no Florida real property, neither form is typically necessary.
Where to Find These Forms
Both DR-312 and DR-313 are available through the Florida Department of Revenue website as fillable PDFs. County clerks of court may also have paper versions on hand. Once completed and notarized, the appropriate form is recorded in the county where the property is located, alongside the deed transfer.
How Elayne Helps Florida Families Work Through Estate Settlement
Florida families settling an estate are asked to manage a list of federal requirements, forms, and deadlines. Elayne organizes all of it in one place. Elayne helps families determine whether Form 706 or Form 8971 applies to the estate, coordinate DR-312 and DR-313 filings for Florida real property transfers, and manage notifications to government agencies.
FAQs
Does Florida have an inheritance tax on property in 2026?
No, Florida has no inheritance tax or state estate tax on property, as both are prohibited by the Florida Constitution. Beneficiaries receiving real estate or other assets from a Florida estate owe nothing to the state simply for inheriting, though federal estate tax may still apply to estates exceeding $15 million.
Do beneficiaries have to pay taxes on inherited property that you sell?
Federal capital gains tax applies when inherited property sells for more than its stepped-up basis—the property's fair market value at the date of death. For example, if property valued at $400,000 at death sells later for $450,000, only the $50,000 gain is taxable, not the full appreciation during the original owner's lifetime.
What's the main difference between federal estate tax and inheritance tax?
Estate tax is assessed against the estate before distribution, paid by the executor from estate funds, and applies to larger estates exceeding $15 million federally. Inheritance tax is assessed after distribution, paid by individual beneficiaries, and varies by state relationship to the deceased.
How much can you inherit without paying state taxes in Florida?
There is no dollar threshold at the Florida state level, so beneficiaries can inherit any amount without owing state tax.
*Disclaimer: This article is for informational purposes only and does not provide legal, medical, financial, or tax advice. Please consult with a licensed professional to address your specific situation.
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