A Comprehensive List of Florida Tax Deductions
Individuals, small businesses, LLCs, and corporations in Florida may wonder which tax deductions are available when it comes time to file their tax returns. As it turns out, the Sunshine State doesn't charge income tax on individual taxes unless you're a corporation, so for most people, Florida tax deductions will only be relevant to federal income tax.
Income Taxes Paid by Florida Residents
Federal Income Tax
Florida residents pay federal income taxes on everything they earn, including salary, wages, rental income, income from investments, and income from Florida short-term capital gains. Tax deductions can be claimed for income from all of these sources.
Long-term capital gains—income from the sale of a capital asset you've held for more than 12 months—is subject to taxation separately from your income and can also be reduced with deductions, including improvements you made to the home and the costs of advertising the property for sale.
Florida Corporate Income Tax
While people who live in Florida don't pay state income tax or local income tax, certain corporations do. The Florida corporate income tax—otherwise known as the franchise tax—is payable on the profits of all corporations, certain LLCs, certain partnerships, banks, savings associations, homeowner and condominium associations, and some tax-exempt organizations.
The tax rate for 2022 is 5.5%, and the applicable corporations and associations will need to file Florida Form F-1120 within a specified period following the end of their tax year. There are several tax credits that corporations in Florida can apply to reduce their tax liabilities to the state, including:
Job creation credits
Investment project credits
Credits relating to taxes paid
Furthermore, corporate income tax paid to the state can be claimed as a tax deduction against federal corporate income taxes, which can benefit Florida-based corporations. It's a bit like a double-taxation treaty: The IRS makes allowances so that you aren't taxed on the same income twice.
Florida Sales Tax
The main state tax that small businesses pay to the state is the Florida sales tax. This tax is generally set at 6% plus local taxes of up to 1.5%. This tax is added to the customer's bill at the time of sale. As sales tax is ultimately paid by the customer and is automatically not charged on excluded items (groceries and medicine), tax deductions don't apply.
Florida Property Taxes
Floridians pay some of the highest property taxes in the United States, but there are several exclusions to make this tax more affordable. The most common exclusions reduce the property tax liability of:
Homeowner-residents
Senior citizens
Homeowners with certain disabilities
Certain honorably discharged veterans
If you have an investment property in the Sunshine State, you will pay the Florida property tax to the county where the property is located at the full, non-discounted rate. Tax deductions for improvements to a rental property will need to be claimed when you file your federal income taxes, as the state of Florida doesn't tax income from rent.
Florida Payroll Taxes
Employers in Florida are required to withhold federal payroll taxes, including:
Federal personal income tax
Federal Social Security tax
Federal Medicare tax
Additional Medicare tax (for high-income earners)
For the State of Florida, you will also need to withhold:
Unemployment tax, also known as the reemployment tax
If you offer employee benefits, these are often tax-deductible. They include:
Medical benefits
Retirement benefits
Commuter benefits
Disability benefits (long and short-term, pre-tax and post-tax)
Fringe benefits given in lieu or in addition to pay, however, are usually taxed and can't be claimed as tax deductions:
Housing
Company car
Company cell phone
S-corp owner medical benefits
Gym or fitness memberships
Student loan repayments
529 college savings payments
Group term life insurance
If you're starting a small business in Florida, getting help with small business accounting will help you ensure you're meeting all of your state and federal employer responsibilities.
Eligible Deductions for Federal Taxes
Tax deductions can be used to reduce the taxable income of FL residents, small businesses, and corporations for the purposes of federal income tax. A Florida small business tax professional can explain exactly which business expenses can be taken as deductions, the supporting documentation you will need to substantiate each deduction, and the maximum amount you can claim.
The main categories of IRS tax-deductible expenses include:
Travel and transportation (calculated according to the IRS mileage rate)
Meals
Gifts
Home office expenses
Depreciation of business assets
After filing your federal tax return, you should keep supporting tax-deduction documentation, including receipts, for a minimum of three years. It's a good idea to digitize these in case the receipts become lost or damaged or the print wears off. Smaller items (below $75) can be logged on a spreadsheet with all of the details of the expense, including when, where, the amount, what the expense was, who was present, and the purpose of the expense.
Pay Only as Much as You Should
While there are no state income taxes for individuals and most small businesses, corporations in Jacksonville, Miami, and around the state still pay income taxes on their profits. And as you know, everyone pays federal income tax to the IRS. To ensure you're not paying more tax than you should, it’s essential to find out about the Florida tax deductions and tax credits available to you and keep supporting documentation for a minimum of three years.
To help you optimize your taxable income, a small business accountant can explain which expenses can be taken as deductions and help you with proactive tax planning. By writing your tax history from the start, you'll take full advantage of the available savings.
