It’s always sunny in the Sunshine State, for a good reason. Its residents can brag about being in one of the most tax-friendly states in the US because Florida does not tax social security, investment income, personal income, inheritance, or estate tax. That’s a lot of benefits for anyone near or in retirement, but there are still some nuances to cover.
1. Florida’s individual income tax
While we mentioned Florida has no state income tax, there is still a federal income tax. Gambling winnings fall into this category, and any wins from horse racing, raffles, online casinos accepting players from Florida, lotteries, and similar are all taxable. If you’ve won a physical product, its fair market value is taxable, as are all cash wins.
The period is one year, and you must report winnings that fall within the W-2G category, and they will be taxed at a 24% tax rate at the time of writing. Winnings in these categories are $600 or more from sweepstakes, pools, and lotteries, $1200 or more from slot machines and bingo, and $1500 from keno. If you win a wager that is 300 times more than what you’ve bet, that also falls into the W-2G category.
2. What’s not taxed in Florida?
It’s always good news to know what’s not taxed; we’ve mentioned this briefly at the beginning. Because Florida is very lax with taxes, most of the benefits cascade. Income tax does not exist at the state level, translating to no pension and retirement income tax. One of the reasons why Florida has many pensioners living in it and an older population is precisely because of these tax exempts. Your 401k, 403b, and IRS are safe, as is any inheritance you intend to leave behind.
Inheritance and estate tax is also absent in Florida, adding it to the list of benefits for retirees. It’s worth mentioning that capital gains fall under personal income tax, meaning they are also not taxed, but only those from investments and dividends. The icing on the cake for our veterans is that Florida does not tax active payments from military duty and military pensions.
3. Florida tax benefits and breaks
In 2024, Florida still intends to be in the top tax-friendly states, especially for its elderly residents, with plenty of tax exemptions. Following the 183-day rule, you can qualify for income tax exemption if you live in Florida for more than 183 days a year. Your physical presence in Florida can qualify you for this discount, and if you can provide proof of permanent residency, you might qualify for homestead exemption in Florida.
Documents like a driver’s license, vehicle plate issued in Florida, or voter ID numbers are all valid forms. Reaching out to a county property appraiser’s office may qualify you for a state homestead exemption. In that case, certain Florida counties offer up to $50.000 in property tax breaks for retirees 65 years or older. Your income, any disability, military service, or being a veteran all come into play to receive even more homestead property tax breaks.
Death and taxes may be the only certainties in life, but Florida is keen on keeping the second one as light as possible. Knowing your tax privileges, alongside obligations is how you can enjoy the full benefits of the Sunshine State.