Florida makes up for having no personal income tax by leaning on a 6% state sales tax, tourism levies paid by roughly 140 million annual visitors, county-level property taxes, one-time real estate transfer taxes, and a 5.5% corporate income tax on C-corporations. The formula shifts the revenue burden away from what residents earn and onto what people spend, what visitors consume, and what property changes hands.
Why Florida Has No Income Tax in the First Place
Article VII, Section 5 of the Florida Constitution bars the state from taxing the income of individual residents. The language technically caps any individual income tax at the amount creditable against a similar federal tax, and since no meaningful federal credit exists, the practical result is zero.1FindLaw. Florida Constitution Art. VII 5 – Estate, Inheritance and Income Taxes The ban covers wages, salaries, dividends, interest, and retirement distributions.
Undoing it would require amending the constitution, and because a new state tax triggers the stricter rule under Article XI, Section 7, two-thirds of voters participating in the election would have to approve.2FindLaw. Florida Constitution Art. XI 7 – Amendments or Revision Relating to Taxation or the State Budgeting Process Nothing has come close. So the state has to raise money elsewhere, and it does.
Sales Tax Does Most of the Work
The 6% state sales tax is Florida’s single largest revenue source, applied to most retail purchases and taxable services.3Florida Department of Revenue. Tax and Interest Rates Counties can add a discretionary surtax of up to 1.5%, pushing combined rates as high as 7.5% depending on where you shop.4Florida Department of Revenue. Discretionary Sales Surtax Electronics, clothing, furniture, restaurant meals, and most consumer goods all carry it.
Some categories are carved out. Unprepared groceries, prescription medications, and certain medical supplies are exempt, which keeps the tax off basic necessities. Prepared food from restaurants and convenience stores is still taxed. The overall design taxes consumption rather than earnings, which tends to favor high earners and retirees who save or invest a larger share of their income.
One recent change: Florida used to charge a separate 2% sales tax on commercial property leases, a feature that made the state an outlier nationally. That levy was repealed effective October 1, 2025.5Florida Department of Revenue. Sales Tax on Commercial Rentals Repealed Effective October 1, 2025
Tourists Pay a Large Share
Roughly 140 million people visit Florida each year, and the tax code is built to collect from them. Counties impose local option transient rental taxes on hotels, vacation rentals, and other short-term stays, with rates that vary by location. In some destinations, 6% or 7% is layered on top of the 6% state sales tax, which can push combined lodging tax above 13%.6Florida Department of Revenue. Local Option Transient Rental Tax Rates The revenue funds tourism marketing, convention centers, beach restoration, and sports facilities under Florida Statutes Section 125.0104.7Florida Senate. Florida Statutes 125.0104 – Tourist Development Tax
For residents, this is a quiet subsidy. Visitors use roads, beaches, and emergency services during their stays, and the tourism levies make them pay for the access. Money that might otherwise come out of local property taxes or new resident fees arrives from out-of-state wallets instead.
Property Taxes Fund Local Government
Property taxes are collected at the county level and pay for schools, fire departments, law enforcement, and local infrastructure. The average effective rate sits below the national median, and permanent residents get two protections that reduce what they owe over time.
The Homestead Exemption
If you own a Florida home and make it your permanent residence by January 1, you can apply for a homestead exemption worth up to $50,000 off the property’s taxable value. The first $25,000 applies to all property taxes including school district levies; the additional $25,000 applies to assessed value above $50,000 and reduces non-school taxes only. Applications go to the county property appraiser by March 1.8Florida Department of Revenue. Property Tax Information for Homestead Exemption
Save Our Homes
Once a home receives its first homestead exemption, annual increases in assessed value are capped at 3% or the change in the Consumer Price Index, whichever is lower.9Florida Department of Revenue. Save Our Homes Assessment Limitation In areas where market values have climbed sharply, a gap opens between the taxable assessed value and what the home would actually sell for. Long-term owners end up paying tax on a figure well below market. The cap resets to full market value at sale, which is why new buyers in long-held neighborhoods often see property tax bills much higher than the previous owner’s.
Real Estate Transfers Generate Billions
Every time real property changes hands, Florida collects a documentary stamp tax on the deed. In every county except Miami-Dade the rate is $0.70 per $100 of sale price. Miami-Dade uses a $0.60 base rate but adds a $0.45-per-$100 surtax on transactions involving anything other than a single-family home.10Florida Department of Revenue. Documentary Stamp Tax On a $400,000 home outside Miami-Dade, that is $2,800 in stamps alone.
A separate nonrecurring intangible tax of 2 mills, or $2 per $1,000, applies to any mortgage or lien recorded against Florida real property.11Florida Department of Revenue. Nonrecurring Intangible Tax A $320,000 mortgage on that same home triggers another $640 at closing. Both are one-time taxes paid at the transaction, and together they bring in billions each year by taxing wealth transfers instead of ongoing earnings.
Corporate Income Tax
Florida does tax corporate income, which surprises people who assume “no income tax” is universal. C-corporations doing business in the state or earning income from Florida sources owe 5.5% on net income.3Florida Department of Revenue. Tax and Interest Rates The first $50,000 of net income is exempt, which zeroes out the liability for most smaller corporations.12Florida Legislature. Florida Statutes 220.14 – Exemption
Pass-through entities are a different story. S-corporations, LLCs, partnerships, and sole proprietorships owe no Florida corporate income tax. Their profits flow through to the owners’ personal returns, and because Florida does not tax personal income, those earnings escape state tax entirely. Only traditional C-corporations face the 5.5% rate, though every C-corp must file an annual return regardless of whether anything is owed after the exemption.
What Florida Still Doesn’t Tax
Florida imposes no state estate or inheritance tax, which matters for retirees with significant assets. The federal estate tax exemption for 2026 is $15,000,000 per person, so estates below that owe nothing at either level.13Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 In Massachusetts (a $2 million threshold) or Oregon (a $1 million threshold), a comfortable nest egg can trigger a state estate bill that Florida avoids. The protection sits in the same constitutional provision that bans the personal income tax.1FindLaw. Florida Constitution Art. VII 5 – Estate, Inheritance and Income Taxes
There is also a federal angle worth understanding. Florida residents cannot deduct state income taxes on their federal return because there are none to deduct. But property taxes and state sales taxes are still deductible under the state and local tax (SALT) cap, which for 2026 is $40,400 for most filers, with a phasedown for modified adjusted gross income above $505,000. Residents of high-tax states often use up their entire SALT allowance on state income tax alone. Floridians can direct the full cap toward property and sales taxes instead, which is a real benefit for homeowners who itemize and carry meaningful property tax bills.