Introduction
Estate and gift taxes are crucial aspects of wealth and asset planning, and they often vary from state to state. In Florida, these taxes have seen changes over time. This article provides an up-to-date overview of the current status of estate and gift taxes in Florida, including information about the exemption amounts for 2023 and 2024, and any potential sunset provisions.
Estate Tax in Florida
Florida remains one of the states that do not impose a state-level estate tax. Currently, Florida does not have an estate tax, offering a favorable environment for estate planning within the state. This means that estates of Florida residents are not subject to state-level estate tax.
However, it is essential to recognize that federal estate tax laws still apply to Florida residents. Significant changes occurred in 2018, which temporarily increased the federal estate tax exemption from $5.49 million to $11.18 million. This exemption is indexed for inflation and the exemptions for 2023 & 2024 are $12.92 million & $13.61 million respectively. This means that estates valued below these thresholds are not subject to federal estate tax and because Florida does not have an estate tax, pass tax free. Please keep be aware, these exemptions are significantly different for non-U.S. residents.
Lastly, another fairly recent change to the federal estate tax laws is portability. This allows a surviving spouse to preserve the unused credit of a deceased spouse and helps correct a negative consequence of the unlimited marital described below. There are deadlines in preserving this credit and certain rules regarding remarried spouses.
Gift Tax in Florida
Florida also does not impose a state-level gift tax, allowing individuals to make lifetime gifts to others without incurring state gift taxes. The federal government, however, has its own rules regarding gift taxes.
As of 2023 and 2024, the federal gift tax laws allow individuals to gift up to $17,000 per year per recipient without incurring any federal gift tax and will increase to $18,000 next year. This annual exclusion amount has increased from $15,000 in previous years. Gifts exceeding this annual exclusion will count against the lifetime exemption and may potentially be subject to federal gift tax. Again, these amounts can be affected by citizenship or residency status.
Unlimited Marital Deduction
The unlimited marital deduction is an essential aspect of U.S. estate tax law. It allows for the tax-free transfer of assets between spouses, regardless of the amount. If both spouses are U.S. citizens, they can take advantage of the unlimited marital deduction. This means that when one spouse passes away, the entire estate passes to the surviving spouse without incurring any federal estate tax on that transfer, regardless of the estate’s size. However, if the surviving spouse is not a U.S. citizen, there are certain limitations on the marital deduction. In such cases, the unlimited marital deduction may not apply, and it’s essential to consider other estate planning strategies to minimize potential estate tax liabilities.
Sunset Provisions
Regarding sunset provisions for federal estate and gift taxes, it is crucial to understand that tax laws can change over time. The TCJA is scheduled to revert to pre-TCJA levels, adjusted for inflation, after December 31, 2025. However, it’s important to monitor legislative developments for any potential changes to these provisions.
Conclusion
As of 2023 and 2024, Florida does not impose state-level estate or gift taxes, offering advantageous conditions for estate and gift planning within the state. Federal estate and gift tax laws continue to apply to Florida residents, with updated exemption amounts of $12.92 million for 2023 and $13.61 million for 2024. It is essential to stay informed about changes in federal tax laws, including any sunset provisions, and seek guidance from knowledgeable tax professionals or attorneys when planning your estate or making significant lifetime gifts to ensure compliance with current regulations.
