Taxation in Florida

The US taxation system is a complicated one, and may involve payments to at least four different levels of government: local, regional, state and federal.

However, although income tax, a progressive tax ranging from 0-35% of taxable income, forms the bulk of taxes collected by the US government, Florida does not collect personal income tax or inheritance tax for that matter. In fact, there is also no tax on retirement.

Instead, a significant proportion of state and local revenues come from property tax and sales tax, with more than half of the Sunshine State’s non-federal revenue collected at local level, mostly through property taxes, which, for homeowners, amount to around 1.5% of their property’s value per annum.

Property tax and fees

Real estate tax rates vary across Florida’s 67 counties, so purchasers must verify the assessed value and the local tax rate to determine the established tax on any given home or parcel of land

Property purchase taxes do not exist in Florida, while there are no agents’ fees for the buyer, as this cost is covered by the seller. But homeowners in Florida will need to pay annual taxes of around 1.5% of the value of the property, as well as a few hundred dollars for title service companies.

Overall, to cover legal, title insurer and notary fees, title insurance premiums, transfer taxes, property taxes and mortgage fees, if applicable, you should generally allow up to 5% of the purchase price.

Rates

The Florida property tax is based on assessed value of the property at the start of each year, minus any potential exemptions or adjustments used to determine the property’s taxable value. A local millage rate – typically $10-$25 dollars per $1,000 of taxable value – is applied to calculate the annual tax.

Other taxes

Personal income tax

Although Florida does not tax personal income, retirement income or some forms of ‘intangible’ property such as stocks and bonds, all residents in Florida must file a federal income tax return, in accordance with IRS rules.

Sales tax

Florida’s general sales tax rate is 6%. With the addition of local surtaxes (which is levied on the first $5,000 of the sales price), the total sales tax for most Florida counties ranges from about 6.25% to 8.5%.

Real estate transfer tax

A transfer tax of 0.7% of the sale price – known as a ‘documentary stamp tax’ – is charged to sellers in all Florida property transactions, except in Miami-Dade County, where sales of single-family residences are taxed at a rate of 0.6%.

Capital Gains Tax

Capital Gains Tax is charged at 15% when a property is held for over one year.

Estate tax

There is no estate tax in Florida, except on the estates of people who died before December 31, 2004.

Double taxation treaty

Britain has a double taxation agreement with the United States, ensuring that people do not pay tax on the same income in both countries.

In accordance with US and wider international law, all residents in Florida (nationals and non-nationals), just like the rest of America, are required to declare assets or groups of assets held outside of each country. Assets may include bank accounts, securities, rights, insurance, annuities and property. The declaration is a separate exercise to the annual tax return.

Continue to section 4: Mortgages

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