Many Florida residents may know that after they die, their estate might be subject to an estate tax. However, they may not realize that sometimes their loved ones might need to pay an inheritance tax.
According to US Tax Center, people typically pay an inheritance tax after they receive an inheritance from a deceased relative. While some people may think this is the same thing as an estate tax, this is not the case. An estate tax is based on the assets which are transferred to a different person. The person who receives the assets usually does not pay this cost; instead, the estate of the deceased pays this expense. Conversely, people generally only pay an inheritance tax if they receive something from the estate. The money for this expense normally comes from the beneficiary, not the estate.
The tax rate for an inheritance tax depends on the person who receives the assets. People who are close relatives of the deceased usually pay a lower amount than people who are not relatives, and spouses may not need to pay this tax at all. Additionally, there may sometimes be exemptions which change the amount a person owes.
People do not always need to pay an inheritance tax. Nerd Wallet says that only certain states tax an inheritance and Florida is not one of these states. However, it is still important for Florida residents to consider this tax, as they may plan to leave assets to a relative who lives in one of these states. Most of the time, people do not need to report an inheritance as income. However, it is essential for people to understand that if they leave assets such as an IRA account, their loved ones may have to pay taxes on any distributions. If people plan to leave an inheritance to family members, it is a good idea for them to speak to a financial professional to understand how this might affect their family.