Florida Inherited Property Tax Guide: What Heirs Need to Know

Tax Overview for Inherited Property

Inheriting property in Florida raises important tax questions. The good news is that Florida is one of the most tax-friendly states for heirs. There is no state income tax, no state estate tax, and the federal tax code provides a significant benefit known as the stepped-up basis that can dramatically reduce or eliminate capital gains taxes when you sell inherited real estate.

This guide covers the key tax concepts that Florida heirs need to understand. While this information is educational, we always recommend consulting with a qualified tax professional for advice specific to your situation.

Florida Has No Estate Tax

Unlike some states, Florida does not impose a state-level estate tax or inheritance tax. This means that simply inheriting property in Florida does not trigger a state tax liability. The property passes to you without any Florida tax due on the transfer itself.

However, the federal estate tax may apply to very large estates. As of 2026, the federal estate tax exemption is approximately $13.6 million per individual. Estates below this threshold owe no federal estate tax. For the vast majority of inherited properties in Florida, no estate tax of any kind is due.

The Stepped-Up Basis Advantage

The stepped-up basis is one of the most valuable tax benefits available to heirs. Here is how it works:

• When someone purchases a property, their cost basis is what they paid for it (plus certain improvements).
• When that person passes away and the property is inherited, the heir's cost basis is "stepped up" to the property's fair market value at the date of death.
• This means that all of the appreciation that occurred during the decedent's lifetime is effectively tax-free for the heir.

Example: Your parent purchased a home in Orlando for $80,000 in 1995. At the time of their death in 2026, the home is worth $350,000. Your stepped-up basis is $350,000. If you sell the property for $350,000, your capital gain is $0, and you owe no capital gains tax.

Without the stepped-up basis, you would have inherited the original $80,000 basis, and selling for $350,000 would have generated a $270,000 capital gain. The stepped-up basis saves heirs thousands of dollars in taxes.

Capital Gains When You Sell

If the property appreciates between the date of death and the date you sell, you will owe capital gains tax on that appreciation. The rate depends on how long you hold the property after inheriting it:

• Long-term capital gains (held more than one year after death): Taxed at preferential rates of 0%, 15%, or 20% depending on your income. Most heirs fall into the 15% bracket.
• Short-term capital gains (held one year or less after death): Taxed at your ordinary income tax rate, which is typically higher.

Importantly, inherited property is always treated as long-term regardless of how long you actually hold it. This means even if you sell the property a week after inheriting it, the gain (if any above the stepped-up basis) is taxed at the lower long-term rate.

Since many heirs sell inherited property relatively quickly, the gain above the stepped-up basis is often minimal, resulting in little or no capital gains tax.

Property Tax Changes After Inheritance

Florida's Save Our Homes amendment caps annual increases in assessed value at 3% for homesteaded properties. When property changes ownership through inheritance, the county property appraiser may reassess the property to its current market value, which can significantly increase the annual property tax bill.

There are exceptions. If the heir is a surviving spouse who continues to use the property as their primary residence, the homestead exemption and the Save Our Homes cap may continue to apply. For all other heirs, expect the property taxes to be reassessed.

This reassessment is another reason many heirs choose to sell inherited property rather than hold it. The increased property tax burden, combined with maintenance costs and insurance, can make holding an inherited property expensive.

Homestead Exemption Considerations

If you plan to move into the inherited property as your primary residence, you can apply for Florida's homestead exemption, which reduces the assessed value by up to $50,000 for property tax purposes. To qualify, you must:

• Be a permanent Florida resident
• Own and occupy the property as your primary residence by January 1 of the tax year
• File the homestead exemption application with the county property appraiser by March 1

If you already have a homestead exemption on another Florida property, you cannot claim it on the inherited property as well. Florida law allows only one homestead exemption per person.

Tax Planning Tips

• Get an appraisal at the date of death. This establishes your stepped-up basis. Without a documented value, the IRS could dispute your basis if you sell later at a gain.
• Sell sooner rather than later if you plan to sell. The closer you sell to the date of death, the smaller the potential gain above your stepped-up basis.
• Track improvement costs. If you make repairs or improvements before selling, those costs can be added to your basis, further reducing any capital gain.
• Consult a CPA or tax attorney. Every estate is different, and factors like multiple heirs, partial ownership, and state-specific rules can complicate the tax picture.
• Consider the FIRPTA implications. If you are a foreign national inheriting Florida property, the Foreign Investment in Real Property Tax Act requires withholding at closing. A tax advisor can help navigate these requirements.

Understanding these tax implications helps you make informed decisions about when and how to sell inherited property. If you are ready to explore your selling options, we are here to help.