(Jun 7, 2023)
There are many factors to consider when you move from one state to another, and Florida income tax rates are one of them. Before you begin planning your relocation, be sure to learn about the Florida tax situation so that you can be well-prepared for what’s coming your way in the Sunshine State.
The process of filing income taxes can be confusing, especially if you're unfamiliar with your state's tax policies and laws. There are some essential facts about Florida income tax that you do need to know. While most people know they need to do this, they're unaware of all Florida income tax ins and outs.
Whether you're moving to Florida or just considering taking up residency there, it's crucial to understand how income tax works in the state before you sign on the dotted line and make a commitment to stay. Here are some essential details you need to understand about Florida income tax.
Who Pays Florida Income Tax
Florida taxes all wages and income earned by residents who meet taxation requirements. That includes wages, interest income, capital gains, rental property income, and self-employment income (from businesses registered in Florida). Regardless of where you live or work in Florida (or if you’re a part-year resident), you must pay tax on your entire taxable income.
Starting with your first paycheck in Florida, you'll have to deal with a small income tax withholding and payments. You'll also have to figure out how to file your taxes each year by April 15th of the following year, and if you're self-employed, you may have to deal with estimated quarterly payments during certain times of the year.
There are more than 6 million taxpayers in Florida. But not all of them pay income tax. The reason for that is simple: There are multiple types of taxes in Florida, and most people don’t have to pay all of them. If you’re a resident or part-year resident, you owe state income tax if your taxable income meets or exceeds certain limits that apply based on your filing status and other factors.
Benefits of Florida Income Tax
When it comes to your state income tax, you might think of the Internal Revenue Service (IRS) as the only organization that collects taxes—but in Florida, you'll also be subject to paying taxes to the Florida Department of Revenue (DOR). If you live in Florida and make more than $12,000 annually, you need to pay Florida income tax.
While this might sound like a hassle at first, there are plenty of benefits to paying Florida income tax, including getting certain credits and deductions that can reduce your overall tax burden even if you don't live in the Sunshine State year-round. Below are more benefits of Florida incomes tax:
Lowest Income Tax Rates
Moving to Florida is a smart choice for many reasons, but one of them will undoubtedly be its low state income tax. Many new residents will be pleasantly surprised by how much they save in taxes—and how quickly it adds up, especially if you're an employee with a competitive salary. With no personal and state income taxes and no inheritance or estate taxes, Florida offers some of America's most favorable living conditions.
The rates are generally low throughout all income levels, with no bracket above 5.5 percent. Many states' top brackets start at higher levels than that, even on lower incomes. In fact, if you're single and earn less than $20,000 a year, you won't have to pay any state tax at all—Florida doesn't have an income tax for low-income workers or retirees. This can give you an excellent opportunity to save for your future.
No Personal Income Tax
In most states, you pay income tax on every dollar you earn. However, in Florida, there is no personal income tax at all. This means that residents and non-residents alike can save more money when they decide to live in or move to Florida. That's an attractive proposition if you make a living through work or investments.
No Local Income Tax
Florida is one of a few states that doesn't collect a local or county-level income tax. While you may have to pay taxes on your federal returns, you won't have to worry about paying additional local taxes. However, some cities charge a city income tax depending on the intensity of your earnings.
Bottom Line
Florida's income tax laws have changed over the past several years, and it's essential to understand how it affects you and your financial situation. While your federal income tax may be relatively straightforward, you may have more trouble keeping up with your income tax. In order to avoid any surprises, it's imperative to understand what you're dealing with before it comes due and ensure you're getting the most from your hard-earned money each year.
(Jun 7, 2023)
