Castillo Rancon
Florida has long been a tax-friendly destination, especially for individuals seeking to escape high personal income taxes in other states. With unique rules and key benefits, the state’s tax structure offers important advantages, as well as a few nuances. Here’s what every resident, investor, and business owner should know about income-related taxation in the Sunshine State.
Florida Has No State Income Tax
Residents of Florida do not pay personal state income tax, a major reason the state draws high earners. This benefit is guaranteed by the state constitution. Attempts to introduce a personal income tax have repeatedly failed. As of 2025, the state remains one of only nine states without this tax.
Retirement Income Is Untaxed
Florida does not tax Social Security benefits, pensions, IRAs, or 401(k) withdrawals. Retirees often relocate here specifically to take advantage of these exemptions. Even earnings from out-of-state retirement accounts are subject to the same treatment. This favorable tax climate has helped the state rank among the top retirement destinations in the U.S. for decades.
Florida Does Not Tax Social Security Or Disability Benefits
Social Security benefits and disability income remain completely exempt from state taxation in Florida. This includes both federal Social Security payments and disability insurance payouts. For seniors and individuals with disabilities, this exemption provides extra financial relief.
No Local Income Taxes, Either
Unlike some states where cities or counties impose their own income taxes, Florida prohibits this entirely. Municipalities cannot tax personal earnings at the local level. So, someone working in Miami or Tampa pays no local income tax, only federal. Local governments rely on other revenue sources, like sales and property taxes.
Corporate Income Tax Still Applies
While individuals in Florida enjoy no state income tax, corporations are subject to a flat 5.5% corporate income tax. The law applies to C corporations operating or earning money in the state and is based on federal taxable earnings, with some state adjustments. Florida’s rate remains lower than California’s 8.84% or New Jersey’s, which is up to 11.5%.
Income Earned Through Pass-Through Entities Isn’t Taxed
Florida does not tax income earned through partnerships, LLCs, or S corporations at the individual level. These firms “pass through” earnings to their owners, who report them on their federal returns. Entrepreneurs often structure their businesses this way to legally avoid state income taxation on profits earned within the state.
Remote Workers Should Track Their Residency
Earning money remotely while living part-time there won’t automatically exempt you from your home state’s income tax. If you split your time between states, your legal domicile and the number of days spent in Florida are key considerations. Several states conduct residency audits to recoup taxes from former residents who are working remotely.
The State Doesn’t Tax Interest Or Dividends
All interest and dividend income in Florida is free from state-level taxation. That includes bank interest, stock dividends, and other passive earnings taxed only by the IRS. This makes the state especially attractive to high-net-worth individuals with large investment portfolios or fixed-income returns.
Florida’s Homestead Exemption Adds Extra Tax Relief
Although Florida lacks a state income tax, its homestead exemption provides substantial property tax savings. Homeowners can exempt up to $50,000 of their home’s assessed value. Additionally, the Save Our Homes provision caps annual increases in assessed value at 3%. For many residents, this provides long-term protection against rising property tax bills.
Capital Gains Are Only Federally Taxed
Florida does not impose a state capital gains tax on individuals, so only federal capital gains rates apply. Gains from real estate or stocks aren’t subject to additional state taxes, which appeals to investors and those selling appreciated property. Short- and long-term federal rates still vary based on income.
