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Florida Retirement Tax Friendliness

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Overview of Florida Retirement Tax Friendliness

Florida has no state income tax, which means Social Security retirement benefits, pension income and income from an IRA or a 401(k) are all untaxed. Florida has no estate or inheritance tax. Property and sales tax rates are close to the national averages.

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Annual Social Security Income
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Annual Income from Private Pension
Annual Income from Public Pension
You will pay of Florida state taxes on your pre-tax income of
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Quick Guide to Retirement Income Taxes
is toward retirees.
Social Security income is taxed.
Withdrawals from retirement accounts are taxed.
Wages are taxed at normal rates, and your marginal state tax rate is %.
  • Our Tax Expert

    Jennifer Mansfield, CPA Tax

    Jennifer Mansfield, CPA, JD/LLM-Tax, is a Certified Public Accountant with more than 30 years of experience providing tax advice. SmartAsset’s tax expert has a degree in Accounting and Business/Management from the University of Wyoming, as well as both a Masters in Tax Laws and a Juris Doctorate from Georgetown University Law Center. Jennifer has mostly worked in public accounting firms, including Ernst & Young and Deloitte. She is passionate about helping provide people and businesses with valuable accounting and tax advice to allow them to prosper financially. Jennifer lives in Arizona and was recently named to the Greater Tucson Leadership Program.

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Florida Retirement Taxes

Photo credit: ©iStock.com/Kajdi Szabolcs

The Sunshine State is one of the ultimate retirement destinations for seniors. It has famously pleasant weather, countless golf courses and beautiful beaches. Florida’s tropical lifestyle can be a big draw for retirees who are done with snow and ice.

But warm winters and green fairways aren’t the only reason people 64 and older comprise 19.1% of Florida’s population, the highest percentage of any U.S. state. The state’s tax system is an equally large factor.

Florida has no income tax, which means all forms of retirement income (including Social Security) are tax-free at the state level. It doesn’t end there, however. While most income-tax-free states make up for the lost revenue with high taxes on property or sales, Florida’s sales and property tax rates are close to the national average.

Is Florida tax-friendly for retirees?

Yes, very. It has no state income tax, which means Social Security, pension income and income from an IRA or a 401(k) are all untaxed. That alone could mean thousands in tax savings for retirees as compared with other states. Additionally, Florida has no estate or inheritance tax. Tax rates on property and sales, as described in further detail below, are close to the national averages.

Is Social Security taxable in Florida?

Not at all. The state of Florida won’t lay a finger on your Social Security income.

Are other forms of retirement income taxable in Florida?

No, and neither are any other forms of income. Florida has no state income tax. This means any earnings, whether from wages or from a pension, are tax-free at the state level. Even if you have an IRA in which you have accumulated savings over years of income in another state, if you move to Florida, your withdrawals will not be taxed.

How high are property taxes in Florida?

Although property taxes are one of the main sources of revenue for local governments in Florida, property tax rates are not especially high. The state’s average effective property tax rate is 1.02%, well below the U.S. average.

On the whole, housing costs in Florida are about 3% lower than the national average. That’s great news for seniors, who spend a significant portion of their income on housing. Keep in mind, however, that in some areas, such as the city of Miami, housing costs are much higher than elsewhere in the state.

Photo credit: ©iStock.com/jfmdesign

What is the Florida homestead exemption?

Florida’s homestead exemption is available to Florida homeowners and can be applied toward their principal residence. It exempts $25,000 of a home’s assessed value from school district property taxes and $50,000 for all other types of property tax.

Depending on your local property tax rate, the homestead exemption could mean hundreds of dollars in tax savings per year. In some Florida counties, senior citizens age 65 and over could qualify for an additional homestead exemption of up to $50,000.

In fact, some counties or municipalities may allow senior citizens with income below a certain level to exempt the entire value of their property from taxes. Contact your local board of county commissioners or municipal government to see if you might be eligible.

How high are sales taxes in Florida?

When considering both state and local rates, sales taxes in Florida are pretty close to the national average. The statewide rate is 6%, while county rates range from 0% to 2%. On average, the total rate faced by Floridians is 6.8%. Those rates do not apply to groceries or medicine, however, two major expenses for seniors.

What other Florida taxes should I be concerned about?

None. Florida does not levy an estate or inheritance tax.

Most Tax Friendly Places for Retirees

SmartAsset’s interactive map highlights the places in the country with tax policies that are most favorable to retirees. Zoom between states and the national map to see the most tax-friendly places in each area of the country.

Rank City Income Tax Paid Property Tax Rate Sales Tax Paid Fuel Tax Paid Social Security Taxed?

Methodology To find the most tax friendly places for retirees, our study analyzed how the tax policies of each city would impact a theoretical retiree with an annual income of $50,000. Our analysis assumes a retiree receiving $15,000 from Social Security benefits, $10,000 from a private pension, $10,000 in wages and $15,000 from a retirement savings account like a 401(k) or IRA.

To calculate the expected income tax this person would pay in each location, we applied the relevant deductions and exemptions. This included the standard deduction, personal exemption and deductions for each specific type of retirement income. We then calculated how much this person would pay in income tax at federal, state, county and local levels.

We calculated the effective property tax rate by dividing median property tax paid by median home value for each city.

In order to determine sales tax burden we estimated that 35% of take-home (after-tax) pay is spent on taxable goods. We multiplied the average sales tax rate for a city by the household income after subtracting income tax. This product is then multiplied by 35% to estimate the sales tax paid.

For fuel taxes, we first distributed statewide vehicle miles traveled to the city level using the number of vehicles in each county. We then calculated miles driven per capita in each city. Using the nationwide average fuel economy, we calculated the average gallons of gas used per capita in each city and multiplied that by the fuel tax.

For each city we determined whether or not Social Security income was taxable.

Finally, we created an overall index weighted to best capture the taxes that most affect retirees. The income tax category made up 40% of the index, property taxes accounted for 30%, sales taxes 20% and fuel taxes 10%.

Sources: Internal Revenue Service, Social Security Administration, state websites, local government websites, US Census Bureau 2018 American Community Survey, Avalara, American Petroleum Institute, GasBuddy, UMTRI, Federal Highway Administration