After cost-of-living considerations, Florida state tax rates can play a major role in determining a resident’s buying power, with the likes of income, property and sales taxes - and this is after the federal government takes its cut. Although some states treat investment income, which is also known as unearned income, differently than they tax wages, Florida doesn’t differentiate between the two types of earnings.
Florida Individual Income Tax
Florida is one of nine states that doesn’t assess income taxes against an individual’s earnings. This exemption to income taxes applies to earned and unearned income alike, so you don’t have to worry about reporting interest payments, dividends and rent proceeds to the state if you’re an individual taxpayer. However, the state’s lack of a personal income tax doesn’t free you from the responsibility of reporting investment income to the Internal Revenue Service on your federal income taxes.
Federal Individual Income Tax
Floridians must still pay federal income taxes on unearned income. Banks and financial institutions report interest payments to the IRS using 1099-INT, while companies report dividend income using a 1099-DIV. Include copies of these forms when you file, reporting the proper amounts on your 1040 before you submit it. The IRS taxes unearned income at the same marginal rates as earned income, which varies between 10 and 35 percent, depending upon your annual income. Don’t confuse unearned income with capital gains, which are profits you receive from selling stocks or other capital assets. The IRS taxes gains at different rates – usually 15 percent if you held the asset for longer than a year – than earned or unearned income.
Florida Coprorate Income Tax
Although individuals don’t need to report earned and unearned income to the Florida Department of Revenue, any corporation that does business or receives income in Florida must use form F-1120 to report earnings to the state, which bases income levels on earnings, including unearned income, reported to the IRS. If your company receives any form of unearned income, it’s reported to the IRS, taxed at federal rates, then indirectly reported as part of your company’s taxable revenue on your Florida corporate income taxes.
Other Florida Taxes
While Florida doesn’t tax the earnings of its citizens, it collects revenue from individuals using two other forms of taxation. The state sales tax rate is 6 percent on all purchases, except for food and medication. Additionally, the state’s property tax rate is 7.89 mils, or $7.98 per $1,000 in value of the property being assessed. Long-term homeowners receive a $25,000 exclusion to the property of their home, and following an initial assessment, tax assessments can’t climb more than 3 percent each year.