Delaware Real Estate Transfer Taxes: An In-Depth Guide

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Clever Real Estate

Updated 

August 31st, 2020

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Transfer taxes are something to consider with every real estate transaction. Read on for what you need to know about Delaware transfer taxes.

If you’re buying or selling a house, one of the largest costs (after the down payment) that you can expect to need by closing is your state’s real estate transfer tax. Transfer taxes can vary based on your region, state, and county. Here’s everything property owners, buyers, and sellers need to know about Delaware real estate transfer tax.

What Are Real Estate Transfer Taxes?

Real estate transfer taxes are taxes charged when property changes hands. It’s a percentage of either the sale value or assessed value of your property, depending on what state you’re in. Thirty-five states and the District of Columbia have transfer taxes.

Real estate transfer taxes are also known as real estate conveyance taxes, mortgage transfer taxes, documentary stamp taxes, and property transfer taxes. Transfer taxes are used for filing purposes and help fund land developments and HUD properties and programs.

Transfer taxes can vary on a regional, state, and local level, so it’s important for buyers and sellers to work with an experienced real estate agent to ensure they completely understand the transfer tax process before buying or selling property.

If you’re buying property, selling property, or have inherited property, transfer taxes in your state and county are something you need to be familiar with. Speak to a Clever Partner Agent about other tax savings for buyers and sellers. They will also be able to guide you to a host of government programs and grants that can cut down on your closing costs.

Learn More: What is real estate transfer tax? (and Who Pays It?)

Who Pays Transfer Taxes in Delaware: the Buyer or the Seller?

Who pays the transfer tax varies state to state and region to region. In Delaware, the buyer and seller split the transfer costs evely.

How Much Are Transfer Taxes in Delaware?

Transfer taxes in Delaware are 4% of the purchase price of the property, with 2.5% going to the state and 1.5% going to the county. The transfer tax is typically split evenly, with both the buyer and seller paying 2%.

Most first-time buyers in Delaware qualify for exemptions. Delaware first-time buyers automatically qualify for an exemption on a purchase price up to $400,000. In this case, the seller would still pay just 2% (1.25% to the state and 0.75% to the country), while the buyer’s share would be reduced to just 0.75% (just to the county). First-time buyers purchasing property worth more than $400,000 will pay 1.25% of the amount above $400,000.

A median home in Delaware is worth $257,521. The seller and buyer of a $257,521 home would, unless exempt, pay $5,150 in transfer taxes. If the buyer is exempt, the seller will still be responsible for her own $5,150 share, but won’t have to pay extra for the buyer.

Can You Deduct Transfer Taxes?

Yes and no.

Unfortunately, transfer taxes are not tax-deductible for the buyer or the seller, unless the property is an investment property. However, property owners can include transfer taxes in the “cost basis” of the property (the amount you paid to acquire it).

In Delaware, the seller generally pays the documentary stamp tax. In this situation, sellers can deduct the tax from the effective sale price of the home when computing the capital gain or loss. Raising the cost basis of the home decreases the capital gain on the sale. This will help reduce the seller’s tax burden.

There is an exemption to the general rule that transfer taxes can’t be deducted. If the property at issue is a rental home or real estate investment, transfer taxes can be deducted as a work expense.

Other Considerations

In addition to being familiar with the Delaware state property transfer tax scheme, buyers and sellers need to understand the overall state and local taxation scheme where their property is located.

A Clever Partner Agent can help you navigate all the fees and taxes you will have to pay when you buy or sell property. They can also let you know about negotiating who will pay the tax, the buyer or seller.

All Partner Agents are up-to-date on the current trends of the real estate market and are also familiar with all of the legal and tax implications of home sales. They are top negotiators from major companies like Keller Williams, Century 21, and RE/MAX. They are also full service, so you won’t sacrifice any benefits while saving money.

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