The Sunshine State of Florida does not only offer scenic places, attractive beaches, and pleasant weather. Beyond that, Florida is also an ideal investment destination. One of the major drivers of vibrant economic activities in the state is its friendly tax structure. In fact, according to the Tax Foundation’s 2022 State Business Tax Climate Index, Florida offers the fourth-best tax structure in the U.S. Are you interested in starting a business in the Sunshine State? Here are the key tax policies in Florida you need to know.
At a glance
| Tax type | Tax rate |
|---|---|
| Individual income tax | None |
| Corporate income tax | 5.5% |
| State sales tax | 6% |
| Local sales tax | 2% max |
| Average combined of state and local sales tax | 7.01% |
| Average property tax | 0.98% |
| Excise tax | 6% |
Individual taxes in Florida
As of 2022, Florida is among the nine states that do not impose personal income taxes on its residents. Other states are Alaska, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. In addition, Florida does not levy death taxes, which means there are no inheritance or estate taxes. For this reason, Florida is an attractive place for retirees. These tax policies in Florida have been effective since 1924 when the state amended its constitution. Under Article IX, Section 11, “No tax upon inheritances or upon the income of residents or citizens of this state shall be levied by the State of Florida, or under its authority…”
The state does not also impose property taxes. However, it is the local government that assesses and levies such taxes. Florida does not receive any revenues from property taxes. A distinct Florida tax policy on properties is called “Save Our Homes” (effective since 1995), which “limits the annual increase in the assessed value of homesteaded properties to 3% or the change in the National Consumer Price Index (CPI), whichever is less.” The following also have discounts on Florida property taxes:
| Eligibility | Discount |
|---|---|
| Seniors 65 or older | Additional $50,000 in exemptions or equivalent to property’s assessed values |
| Widow, widower, blind persons, persons with disability | $500 exemption |
| Quadriplegics who use their own homes | Full exemption |
| People who are permanently disabled or legally blind individuals earning below the threshold | Full exemption |
| Spouses of first responders who died in the line of duty | Full exemption |
| Member of Armed Forces who rent out their Florida property | Homestead exemption |
| Disabled servicemember who is honorably discharged due to duty | 10% discount or $5,000 off the assessed values |
| Veterans, honorably discharged, with disabilities | Full exemption |
| Veterans, honorably discharged, confined to wheelchairs | Full exemption |
Florida also charges excise taxes on particular goods. The state imposes $1.34 of excise tax per pack of 20 cigarettes. By 2022, the state imposes 19 cents per gallon of motor fuel; 19 cents per gallon of diesel fuel; and 4.27 cents per gallon of aviation fuel. The tax rates vary among counties and localities.
Policies for corporate taxes in Florida
State-wide, Florida levies a corporate income tax on businesses at 5.5%. This is much lower than the nationwide average CIT rate which stands at 21% currently. President Joe Biden’s administration proposes to increase the CIT to 28%.
All entities conducting business in the state of Florida are required to file for CIT, including:
- Corporations (foreign and domestic)
- Tax-exempt organizations
- Associations
- LLCs (partnerships and single-member)
- Homeowner associations
- Political organizations
- S-corps
Tax incentives for corporations
| Type of credit | Who is qualified | Estimated tax discount |
|---|---|---|
| Capital Investment Tax Credit | Available to businesses in high-impact sectors. Business must have a project with at least $25 cumulative capital investment Business project must be certified by the Florida Department of Economic Opportunity | Maximum 5% of the capital costs of the project can be claimed annually for up to 20 years |
| Community Contribution Tax Credit | Must be considered an eligible project sponsor by the Department of Economic Opportunity | 50% of qualified community contribution Maximum: $200,000 annually carried over up to five years |
| Voluntary Cleanup Tax Credit | Corporations that volunteer to rehabilitate contaminated sites; projects should be approved by the Department of Environmental Protection | 50% of rehabilitation costs Maximum; $500,000 per site annually carried over up to five years |
| Hazardous Waste Facility Tax Credit | Available to owners of facilities that recycle commercial hazardous waste, permitted by the Department of Environmental Protection | 5% of the cost of stationary facility equipment Credit may be equivalent to expenses incurred for hydrologic, soil, and geologic evaluations, etc. |
| Research and Development Tax Credit | Available to eligible businesses with qualified research expenses | Credits depend on Florida’s budget. Here is the 2022 allocation report |
If you are interested in incorporating a company in Florida, it is best you should be familiar with the tax policies in the state. Should you have any questions about this, please don’t hesitate to reach out to our tax experts.
This guide is part of Taxation & Accounting in our Launch Guide.
