You do not pay taxes on inheritance in Florida. The state has no inheritance tax and no estate tax, so whatever you receive from a Florida decedent, whether cash, real estate, or investments, passes to you without a state tax bill attached. Federal law and other states’ laws can still reach you, and anything the inherited assets earn once they are yours is taxable like any other income.
Why Florida Collects Nothing
Florida’s Constitution caps any state-level tax on estates or inheritances at the amount that can be credited against federal estate taxes. Before 2005, federal law offered a dollar-for-dollar credit for state death taxes paid, and Florida collected an estate tax equal to that credit. When Congress replaced the credit with a deduction in 2005, the amount Florida could collect dropped to zero. No Florida estate tax has been due for anyone who died on or after January 1, 2005.1Florida Department of Revenue. Estate Tax – Florida Dept. of Revenue
Unless Congress restores that federal credit, the state’s tax on inheritances stays at zero.
The Federal Estate Tax
The federal government does tax large estates, but the threshold is high. For people who die in 2026, the federal estate tax exemption is $15 million per individual. Only the portion of an estate’s value above that line is taxed, at rates up to 40%.2Internal Revenue Service. What’s New — Estate and Gift Tax
That figure reflects a permanent increase enacted through the One, Big, Beautiful Bill Act, signed into law on July 4, 2025. The exemption had been scheduled to drop to roughly $7 million at the end of 2025 when a temporary provision from the 2017 Tax Cuts and Jobs Act expired. Congress locked in the higher amount and indexed it for inflation going forward.2Internal Revenue Service. What’s New — Estate and Gift Tax
One point that surprises many heirs: the estate pays this tax, not you. The executor files Form 706 and settles anything owed out of estate assets before distributing what is left. You do not receive a bill from the IRS for federal estate tax on your inheritance. Married couples can effectively double the exemption to $30 million when the surviving spouse’s executor properly claims the deceased spouse’s unused amount.3Internal Revenue Service. Frequently Asked Questions on Estate Taxes
When Another State Can Tax Your Inheritance
Living in Florida does not shield you if the person who left you the inheritance lived somewhere else. Five states impose their own inheritance tax on beneficiaries: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.4Tax Foundation. Estate and Inheritance Taxes by State, 2025 If your benefactor lived in one of those states, expect to file with that state’s revenue department, even though you are a Florida resident.
Rates and exemptions vary. All five states charge higher rates on inheritances received by distant relatives and unrelated beneficiaries than on those going to close family. Spouses are exempt everywhere, and children are often exempt or taxed at very low rates. Nieces, nephews, friends, and unmarried partners face steeper treatment. Kentucky, for example, gives nieces and nephews only a $1,000 exemption and taxes the rest at rates between 4% and 16%.5Kentucky Department of Revenue. Inheritance and Estate Tax
Iowa formerly appeared on this list but fully repealed its inheritance tax for anyone who died on or after January 1, 2025. Maryland is the only state that imposes both an estate tax and an inheritance tax.
What About Income the Inheritance Produces?
The inheritance itself is not income. The IRS does not treat money or property you receive from a deceased person’s estate as taxable income on your return. The moment those assets start producing earnings in your hands, though, the earnings are taxable. Dividends from an inherited stock portfolio, rent from an inherited property, and interest from an inherited bank account all go on your federal tax return in the year you receive them.
Life insurance is a separate story. A death benefit paid to you as a named beneficiary is generally not included in your gross income and does not need to be reported. Any interest that accumulates on the proceeds before you withdraw them is taxable, but the death benefit itself is not.6Internal Revenue Service. Life Insurance and Disability Insurance Proceeds
If You Sell an Inherited Asset
Selling triggers capital gains tax, but a favorable rule limits how much appreciation counts. Under federal law, the cost basis of inherited property resets to its fair market value on the date of the owner’s death.7Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent This “stepped-up basis” wipes out all the gains that accumulated during the deceased person’s lifetime.
Say your parent bought stock for $20,000, and it was worth $200,000 the day they died. Your basis is $200,000. If you sell it for $210,000, you owe capital gains tax only on the $10,000 gain that occurred after you inherited it. The $180,000 of appreciation that built up over your parent’s lifetime disappears from the tax calculation.
The rule makes an accurate date-of-death appraisal important, especially for real estate and closely held businesses. A professional appraisal for a residential property typically costs a few hundred dollars and can save thousands in taxes by establishing a defensible basis. For estates large enough to require a Form 706 filing, the executor must report asset values to both the IRS and the beneficiaries on Form 8971, and beneficiaries must use those reported values as their basis.8Internal Revenue Service. Instructions for Form 8971 and Schedule A
Inherited Retirement Accounts Are Different
Retirement accounts are the main exception to the general rule that inheritances are not taxed as income. Traditional 401(k)s and traditional IRAs hold pre-tax money, so distributions to beneficiaries are taxed as ordinary income at your rate. How and when you have to take those distributions depends on your relationship to the account owner and the timing of their death.
Most non-spouse beneficiaries who inherited a retirement account from someone who died after 2019 must empty the account by December 31 of the tenth year following the owner’s death.9Internal Revenue Service. Retirement Topics – Beneficiary Whether you also have to take withdrawals during years one through nine depends on whether the original owner had already started their required minimum distributions:
- If the owner died before their required beginning date (age 73 in 2026), you do not have to take annual distributions. You just need the account emptied by the end of year ten.
- If the owner died after their required beginning date, you must take annual distributions in years one through nine based on your own life expectancy, then withdraw whatever remains by the end of year ten.
Starting in 2026, the IRS is no longer waiving penalties for missed annual distributions when they are required. If you fall into the second category and skip a required withdrawal, you face an excise tax of 25% on the amount you should have taken out. That drops to 10% if you correct the shortfall within two years.10Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
Roth IRAs flip the tax treatment. Because contributions went in after tax, withdrawals of both contributions and earnings from an inherited Roth IRA are generally tax-free, as long as the account has been open for at least five years. If the Roth is less than five years old at the time of withdrawal, earnings may be subject to income tax.9Internal Revenue Service. Retirement Topics – Beneficiary The 10-year rule still applies, but tax-free distributions make it far less painful.
Inheriting From Someone Abroad
If you inherit money or property from someone who was not a U.S. citizen or resident, a separate reporting requirement kicks in. Any Florida resident who receives more than $100,000 in a single year from a foreign estate or nonresident alien must report it to the IRS on Form 3520.11Internal Revenue Service. Large Gifts or Bequests From Foreign Persons Bequests over that threshold must be individually identified for any single item worth more than $5,000.
This is a reporting requirement, not a tax. The inheritance itself is not taxed just because it came from abroad. But the penalties for failing to file Form 3520 are steep: the initial penalty is the greater of $10,000 or 35% of the amount you should have reported, and additional penalties of $10,000 accrue for every 30-day period you remain out of compliance after the IRS notifies you.12Internal Revenue Service. Failure to File the Form 3520/3520-A Penalties People with family abroad sometimes miss this because they assume a non-taxable inheritance needs no paperwork. It does.