What are Law Income Requirements in the State of Florida?
If you are earning an income, you are expected to pay income tax. It is an unavoidable responsibility of being a resident in a particular place. In the USA, different states have different tax rates. There are different types of taxes that are subjected to individuals and corporations. The primary tax types include corporate income tax, excise tax, sales tax, and personal income tax. This article will help you better understand the income tax laws of Florida.
Florida tax laws explained
Of all the states in the US, Florida is known to have one of the lowest tax burdens for its businesses and residents. While Florida does not impose a personal tax, it generates most of its tax revenue from excise and sales taxes. Like most American states, Florida imposes a corporate income tax. But it stands apart because it does not levy privilege or franchise tax that is typically subjected to businesses. Here are the income taxes levied in Florida.
Personal income tax
Florida is one of the few states in the US that does not levy a personal income tax. This means that income passed personally to you from your business is not subjected to tax.
Corporate income tax
Corporate income in Florida is taxed using either of these rates - state tax of 5.5% on federal income or alternative minimum tax (AMT) of 3.3% based on federal rules. It is mandatory for a corporation doing business in Florida to use the method that results in a higher tax. This applies to all local and foreign corporations in the state.
The state of Florida levies a sales tax rate of 6% on certain goods and services. In addition to state taxes, some counties in Florida charge local taxes. This add-on tax is usually below 2%. Some items that are exempted from this are food, medicine, and groceries.
Capital gains tax
A capital gains tax is charged on the profits one makes from selling a capital asset such as houses, land parcels, personal items, businesses, stocks, etc. These profits are subjected to taxes on both state and federal levels. State capital gains taxes are typically at a higher rate compared to federal tax rates. Capital gains tax rates are often equal to state income tax rates.
Excises taxes are also called differential commodity taxes or selective sales taxes. These taxes are levied on specific goods, rentals, or services. Excise taxes fall under indirect tax because consumers are not directly charged. They are mostly paid by the seller or producer. The tax cost is then added to the item’s sale price which is then paid by the consumer. Excise taxes are levied on items such as motor fuel, tobacco products, alcohol, etc.
Estate and inheritance taxes
In most states, a deceased person’s property is subjected to estate and inheritance taxes. After an individual has died, their property is valued, and an estate tax is levied and paid before it is distributed to rightful heirs. On the other hand, the heir is charged an inheritance tax after they inherit the deceased individual’s property. Florida does not charge estate or inheritance taxes, but residents are not exempted from federal estate tax.
Property tax is most often applied to houses and another real estate, but some states include personal items such as cars under the tax bracket. The tax levied on a person’s property is determined by the value of the asset and the taxable share of this value. Property taxes are subject to constant change and vary from county and localities within the state.
Do your research and learn more about the income tax laws in Florida before you file for tax returns.