What Are Real Estate Transfer Taxes?
Transfer taxes are yet another expense due before completing a successful real estate transaction. Depending on the state you’re in, there are different requirements regarding if a buyer or seller is obligated to pay and the amount due. In some locations, a statewide jurisdiction may forego a transfer tax — Alaska is one of them.
In general, a real estate transfer tax is applied as a percentage of a home’s value during a real estate transaction. These can vary dramatically between city, county, and state requirements to complete a change in ownership of property. In areas where there is an obligation, this is a fee that is often subject to negotiation during the offer stage.
While Alaskans are free from transfer taxes during the closing, it’s a good idea to work with a real estate expert who is proficient in their local markets. Since fees can be mandated at a county level, there may be places in Alaska who will require a percentage of the sale. It’s best to be prepared for every expense that comes up during a property transaction.
Who Pays Transfer Taxes in Alaska: the Buyer or the Seller?
In most states where a transfer tax is levied, the seller is usually obligated to pay for the privilege of changing ownership. Of course, the outcome can vary depending on the county you’re buying in, the current condition of the market, and an agent’s aggressiveness during negotiations
Once a purchase agreement is made, whoever has agreed to pay the imposed tax is legally responsible. Depending on the terms, this can be a significant expense to buyers who are already on the hook for substantial closing fees or a seller who is facing slim profit margins after a sale.
In addition to negotiating transfer taxes, sellers can limit their expenses by working with a low commission real estate agent. An expert in the Clever Partner Network will precisely navigate you through your sale in Alaska for a flat $3,000 or 1% of a sale amounting to over $350,000.
How Much Are Transfer Taxes in Alaska?
Since Alaska doesn’t legally require a transfer tax, residents are allowed to buy and sell a property without this additional fee. Of course, it’s important to ask a professional agent about special circumstances which sometimes arise at a local level.
A real estate agent who is familiar with their local area will inform you of municipalities who may have different requirements than the rest of the state. Their expertise is an immense advantage during the home buying experience. Need another advantage to pair with a knowledgeable realtor? Since commissions are generally paid by the seller, their service is effectively free for buyers.
Can You Deduct Transfer Taxes?
No, transfer taxes are non-deductible but can be used to decrease the total taxes earned by combining them with the cost basis of a property. The cost basis is used to calculate the final gain on the sale which then determines the obligations for a capital gains tax imposed to sellers.
A capital gain is a difference in value between the amount you paid for a home versus what you sell it for. Most sellers list their home after making upgrades which results in a higher sale price. Unfortunately, these gains are imposed to a capital gains tax which requires a seller to report the extra income.
When wrapping the amount of transfer taxes into a property’s cost basis, your tax obligation can actually be decreased. Sellers are not immediately required to pay these fees as they are to be reported during the regular tax filing period.
Luckily, Alaskans are free to transfer property without this extra expense. However, there are numerous other tax requirements that you should know before buying or selling a home there.
Transfer taxes are due to be paid during the closing process. Depending on the terms of the deal, a buyer or seller can be responsible for its entirety or the fee can be split between both parties. The terms can be found on the HUD-1 forms that are used during the final step of property exchange.
While Alaska doesn’t show any signs of imposing a real estate transfer tax in the near future, remember, policies can always change. Since these fees are subject to local requirements, it may only require a suggestion from a member in legislation to present a change to the law.
Stay ahead of the curve of the unique absence of a transfer tax in the state by working with a professional real estate agent during any property transaction. They excel at staying up to date with changes in the laws that affect their clients. Taxes are a necessary part when real estate changes hands, their expertise can ensure your sale or purchase is completed legally and without unexpected costs.