State Taxes in Florida
Florida is known for having no personal income tax. The state’s tax revenue primarily comes from tax on businesses and industry, real property, and hospitality tax. Additionally, Florida levies a 5.5% tax on the income of any corporation conducting business within the state. Despite the lack of a personal income tax, residents still pay federal income taxes, FICA payments toward social security and Medicare, property taxes, and a sales tax that excludes most groceries.
Constitutional Protection From Income Tax
The Florida constitution, amended in 1924, prohibits the state from collecting income tax from individuals. This amendment still stands as of 2023 and has been reinforced by the Florida Constitution of 1968, which further protects residents from new taxes or increases in existing taxes.
Tax Benefits for Residents and Retirees
Florida is particularly attractive to retirees because Social Security income, pension income, and income from an IRA or 401(k) are all untaxed at the state level. There is no estate or inheritance tax in Florida, which can result in significant tax savings compared to other states. This, combined with the sales tax and corporate income taxes, allows the state to forgo personal income taxes while still providing government services.
Additional Tax Information
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Florida Corporate Income Tax: A tax rate of 5.5% applies to corporations.
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Florida Property Tax: Based on the market value as of January 1st each year.
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Sales Tax: Most purchases are taxed, except groceries.
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Vehicle License Tax: Based on the vehicle’s net weight instead of an ad valorem tax.
Tax Exemptions for Seniors
Florida offers a Senior Homestead Exemption for residents 65 years of age or older with a household income of less than $30,000. This exemption helps reduce the property tax burden for qualifying seniors.
Making Up for the Lack of Income Tax
To offset the absence of a state income tax, Florida may rely on higher property taxes, sales taxes, and fuel taxes. These combined levies contribute to the overall tax revenue needed to fund state functions and educational systems.