California’s current transfer tax rate is $1.1 for every $1,000. So, for a $300,000 house, the transfer tax due will be $330. It doesn’t stop there, however, as cities within the state may charge an additional fee on top of the standard rate, which can cause your total dues to increase.
The specifics on who pays the transfer tax in California are a little loose, but the burden typically lies with the seller.
Clever Real Estate can help you cut costs here — our concierge team will partner you with an experienced agent that can help you negotiate a good deal with your buyer on transfer taxes. Not to mention, you'll save big by paying only 1.5% in commission.
What taxes will you have to pay on your real estate transaction in California? Let's take a closer look at how California real estate transfer taxes work and how much you can expect to pay.
Who pays transfer taxes in California: The buyer or the seller?
Most purchase agreements, as a standard feature, state that the seller will pay the transfer tax. However, sellers have the ability to negotiate, and some buyers may be willing to pay the taxes in exchange for concessions - such as a discount on the home price. In some cases, sellers might also be exempted from paying taxes. Buyers will have to pay it in such situations, regardless of what concessions are offered.
Since the state doesn't care who pays, what happens if both the seller and the buyer don't pay the property transfer tax? In this case, the taxes will still default to the seller. This initial mention in the purchase agreement is good enough for the government to hold you responsible.
So, if you've negotiated a deal where the buyer pays the transfer taxes, make sure that this is reflected on the purchase agreement. The government is only concerned about what the purchase agreement states.
Just to be on the safer side, sign the agreement in the presence of your real estate agent. Agents see and work on agreements all the time. Having your agent by your side will help you understand the agreement and its terms much better.
How much are transfer taxes in California?
Property transfer taxes are derived from the selling price of your home. The California Revenue and Taxation Code states that all the counties in California have to pay the same rate.
The current tax rate is $1.10 per $1,000 or $0.55 per $500. So, if your home sells for $600,000, the property transfer tax is $660.
Keep in mind that many cities and locales in California have the authority to add additional transfer taxes on top of the standard county rates. Alameda County, for example, may charge up to $12 per $1,000 of home value! Be sure to check local rates before signing a purchase agreement to ensure you're not blindsided by an unexpected tax.
Unfortunately, there’s no getting around paying California’s transfer taxes. But with Clever, you can save money and offset the blow of a hefty fee.
We’ll partner you with a local real estate agent that knows how to deal with the state’s tax and helps negotiate a deal in your favor. What’s more, our agents charge only a 1.5% listing fee compared to the national average of 3%! The money you'll save can more than offset the cost of the transfer taxes.
Can you deduct transfer taxes?
According to the Internal Revenue Service (IRS), property transfer taxes cannot be deducted from your income tax return. However, you can deduct transfer taxes from your overall capital gain.
When you sell a home, you have to pay the capital gains tax on your profits. You can deduct the transfer tax amount from your capital gains. This way, you make a lesser profit, which in turn means that you have to pay lesser tax.
So, even though you can't deduct transfer taxes directly from your income tax, you can lessen your tax burden indirectly by paying lesser capital gains tax.
When do you pay California transfer taxes?
Transfer taxes are paid at the closing of a deal, and in most cases are paid by the seller. So, when you're filing your taxes, sellers should be sure to deduct the transfer tax from their capital gain.
This is especially important because capital gains tax is paid to the federal government and the transfer tax is paid to the state government. So, chances are, you'll be paying both these taxes separately, and at different times.
California transfer taxes summary
Given that there are quite a few procedures and laws to follow, especially with local areas having additional tax requirements, it's a good idea to hire an expert local real estate agent to help you out.
These experts do more than just list your homes online — they take care of the paperwork, negotiate on your behalf, and ensure that you get a great price for your home.
The easiest way to find a local expert is through Clever. Our partner agents have the experience necessary to guide you through real estate transactions and get you the best possible deal.
» SAVE: Learn more about how a Clever agent can help you navigate California transfer taxes