Florida is often painted as a retiree’s paradise, with its sunshine, beaches and no state income tax. But does that mean retirees get to keep all of their retirement income tax-free?
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To find out, ChatGPT was asked to break down what taxes retirees face in Florida. The answer: while the state is one of the most tax-friendly in the country, Uncle Sam still gets his cut at the federal level.
State Taxes
Florida is one of the few states that doesn’t have an income tax, but that isn’t the only available tax savings. According to ChatGPT and AARP, here are the taxes that retirees pay in Florida.
- Income tax: Florida has no income tax. This means pensions, 401(k) and IRA withdrawals, Social Security benefits and investment income are not taxed at the state level.
- Property tax: Florida property taxes are a county tax based on the assessed value of the property. The average rate is 0.79% of the assessed value of the home, but it varies widely.
- Sales tax: There is a 6% levy on most consumer goods and services, excluding most groceries, prescription and nonprescription drugs, and lottery winnings. All counties, except Collier County, also have an additional surtax, with rates ranging from 0.5% to 2%. For some transactions — including vehicles, boats, aircraft and mobile homes — the local surtax only applies to the first $5,000.
- Estate/inheritance tax: There is no inheritance or estate tax at the state level.
Florida also provides several tax breaks, including the homestead exemption and an additional property tax break for residents 65 and older, according to AARP.
Florida residents who own a permanent residence may qualify for a property tax break of up to $50,000. Additional breaks are available to property owners with disabilities, veterans, active-duty service members and first responders. Once you qualify for the homestead exemption, property assessments cannot increase by more than 3% or the percentage change in the Consumer Price Index, whichever is less. This is known as the Save Our Homes program.
Residents 65 and older can also save an additional $50,000 on their property taxes, but they must meet certain requirements.
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Federal Taxes
Although Florida doesn’t have an income tax, it is taxed at the federal level. Here’s what that looks like, according to ChatGPT.
- Income tax: All earned income, including wages from part-time work, is subject to federal income tax. Withdrawals from tax-deferred retirement accounts such as traditional 401(k)s, IRAs and pensions are also taxed as ordinary income. Depending on your overall income, up to 85% of your Social Security benefits may be taxable. Investment income — like dividends and capital gains — is taxed at the federal level as well.
- Property tax: There is no federal property tax. Property taxes are assessed and collected by state and local governments only.
- Sales tax: The federal government does not levy a general sales tax. Sales taxes are imposed by states and local jurisdictions.
- Estate/inheritance tax: While Florida does not have its own estate or inheritance tax, the federal estate tax may apply to estates exceeding the federal exemption. For 2025, the exemption is $13.9 million per individual, according to the IRS, meaning only very large estates are subject to the federal estate tax.
How Much Will Retirees Save?
How much you save by retiring in Florida depends on a variety of factors, and according to The Wall Street Journal, you may not save as much as you think. You need to consider other costs beyond taxes when factoring in the total cost of living.
ChatGPT pointed out that retirees can avoid 10% to 13% in state income tax by living in Florida, especially those moving from states with high income taxes like California. However, Florida does have higher property insurance costs due to extreme weather risks. Insurance rates have increased about 30% statewide and 40% in central Florida since 2022, Central Florida Public Media reported.
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This article originally appeared on GOBankingRates.com: I Asked ChatGPT How Much I’d Pay in Taxes If I Retired in Florida — Here’s What It Said
