No estate tax: what Florida estates still owe

A Florida decedent’s estate owes the state nothing. Florida’s estate tax was never a separate tax; it was a “pick-up” of the credit the federal estate tax once allowed for state death taxes, and when Congress phased that credit out, Florida’s tax went with it for anyone dying after December 31, 2004. The constitution bars the legislature from bringing back more than the federal credit allows, which is now nothing. There is no inheritance tax on the people who receive the property, either. Since July 1, 2023, the personal representative does not even file the old affidavit of no tax due.

That leaves the federal government, and a set of obligations that do not depend on which state the person died in. Almost every estate files a final income-tax return for the decedent. Many file an income-tax return for the estate itself while the assets are being gathered and distributed. A small number file the federal estate-tax return, and a larger number should consider filing it anyway to pass an unused exemption to the surviving spouse. And separately from tax, the property has to get from the decedent’s name to the heirs’, which in Florida runs through probate court unless the planning was done to avoid it, and through a set of homestead rules that override the will.

The federal estate tax: who is actually in it

For a person dying in 2026, the federal estate tax applies only to the part of a taxable estate above $15,000,000, a figure set by the 2025 tax act, indexed for inflation from 2027. The rate on the excess is 40%. A married couple can shelter $30,000,000 between them, because whatever the first spouse does not use can be carried over to the second through the portability election. Lifetime gifts above the $19,000 annual exclusion per recipient use up the same $15,000,000; gifts and the estate share one exemption.

The gross estate is broader than people expect: the house at market value, retirement accounts, life insurance the decedent owned, and revocable-trust assets all count, whether or not they pass through probate. Even so, very few Florida estates owe the tax. For the rest, the federal estate tax is a question of whether to file the return voluntarily, not whether tax is due.

Form 706, and why a $4,000,000 estate might file one

The estate-tax return is required when the gross estate plus adjusted taxable gifts exceeds the exemption. It is due nine months after death, with a six-month extension, and it lists every asset at its date-of-death value, every debt, and every lifetime gift. The reason smaller estates file it is portability. When a married person dies, the unused part of the $15,000,000 exemption passes to the surviving spouse only if the first spouse’s estate files a Form 706 and makes the election. A widow whose husband left a $4,000,000 estate entirely to her owes no tax and has no filing requirement, but if she does not file, his $15,000,000 is gone. If she files, she carries $30,000,000 of exemption into her own estate. For a couple whose Florida house, investments and retirement accounts could grow past $15,000,000 by the second death, or who might remarry, inherit, or sell a business, the election is cheap insurance. For an estate that was not required to file, the IRS allows a portability-only Form 706 up to five years after death under Revenue Procedure 2022-32, with the return marked at the top as filed under that procedure.

The final Form 1040

The decedent’s last income-tax return covers January 1 through the date of death and is due the following April 15, like any other year. Income received before death goes on it; income received after death belongs to the estate or to whoever inherited the asset. The personal representative signs it, writing “deceased” and the date of death at the top; a surviving spouse can file it jointly, with the full standard deduction, and can use the joint rates for the following two years if there is a dependent child.

A refund on the final return needs Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer, unless the claimant is a surviving spouse filing jointly or a court-appointed representative who attaches the court certificate. Medical expenses paid by the estate within one year after death can be deducted on the final 1040 as if paid before death, which is often worth more than deducting them on the estate’s return.

Form 1041: the estate as a taxpayer

From the date of death until the assets are distributed, the estate is a separate taxpayer with its own identification number. It files Form 1041 for any year in which it has $600 or more of gross income: interest and dividends on the accounts, rent from a property not yet sold, gain on the sale of the house if it sold for more than its stepped-up value, and income in respect of a decedent, which is income the decedent earned but had not yet received, such as a final paycheck, an IRA distribution, or accrued interest.

Most of the income does not stay in the estate. What is distributed to beneficiaries during the year is deducted by the estate and taxed to them, reported on Schedule K-1. What is held back is taxed to the estate at the compressed trust brackets, which reach the top 37% rate at a little over $16,000 of income, so personal representatives have a strong reason to distribute income rather than accumulate it. The estate can choose a fiscal year ending on any month-end within twelve months of death, which lets the first return run up to a year and the beneficiaries report the income a year later than they otherwise would.

The stepped-up basis is what keeps most Florida estates’ 1041s short. Inherited property takes a basis equal to its fair market value at the date of death. The house bought in 1990 for $120,000 and worth $700,000 at death is worth $700,000 to the heirs; sold six months later for $710,000, the gain is $10,000, not $590,000. The appraisal at death is therefore a document the heirs will want for years. Retirement accounts are the exception: there is no step-up, and an inherited IRA is taxed to the beneficiary as it is withdrawn, generally within ten years for anyone other than a spouse.

Probate in Florida

Probate is the court process that moves assets titled in the decedent’s sole name to the heirs. It is separate from tax, but it decides who the personal representative is, and the personal representative is the one who signs the returns. Assets with a named beneficiary or a survivorship title, retirement accounts, life insurance, joint accounts, property held in a revocable trust, pass outside probate.

Florida has three paths. Formal administration is the full process, with a court-appointed personal representative, notice to creditors, a creditor period, and a final accounting; it is required for most estates over the summary threshold and takes months. Summary administration is available when the value of the estate subject to administration, excluding property exempt from creditors’ claims, is $75,000 or less, or when the decedent has been dead more than two years; the court orders the distribution directly and no personal representative is appointed. Disposition without administration is a form, not a case, for estates with nothing but exempt personal property and enough non-exempt property to cover the funeral and the last 60 days of medical bills.

The homestead is excluded from the $75,000 count because it is exempt from creditors’ claims, which puts many Florida estates with a house and modest other assets into summary administration. One trap: with no personal representative appointed, there is nobody with authority to sign a Form 1041 for the estate, so the beneficiary who receives the income reports it, and the final 1040 is signed by the surviving spouse or by a person who attaches Form 1310.

Who gets the house: the homestead descent rules

Florida’s homestead protections continue after death, and they override the will. The constitution says a homestead cannot be devised, meaning left by will, if the owner is survived by a spouse or a minor child, except that an owner with a spouse and no minor child may leave it to the spouse outright. A will that leaves the house to the children of a first marriage, when the owner remarried and died with the second spouse still living, does not work.

Where the homestead cannot be devised, section 732.401 says who takes it. If the decedent is survived by a spouse and descendants, the spouse takes a life estate, the right to live there for life, and the descendants take the remainder, which vests at the death. The spouse may instead elect, within six months of the death and while still living, to take an undivided one-half interest as a tenant in common with the descendants; the election is irrevocable. If there are no descendants, the homestead goes to the spouse outright; with no spouse, to the descendants.

Two consequences for the tax side. First, the homestead passes outside the probate estate and outside creditors’ reach, so it does not count toward the $75,000 summary threshold and cannot be sold to pay the decedent’s debts. Second, whoever takes it gets the stepped-up basis as of death, and if the surviving spouse keeps living there, the homestead exemption and the Save Our Homes cap can continue in the spouse’s name rather than resetting; a transfer to children who do not live there is a change of ownership that resets the assessment to market value the following January 1. The property appraiser needs to be told either way.