If you're looking to purchase or sell a home in Florida, understanding state real estate transfer taxes is essential. There are more costs involved in the transfer of property than you might be aware of. Here's what you need to know before selling or buying property in Florida.
Real estate transfer taxes exist in most states. Essentially, any time you buy or sell property such as real estate or a vehicle, a tax is applied to the transfer of that property. If you live in a state that has transfer taxes, any time property changes hands, a transfer tax (and possibly other fees) will be in play.
While transfer taxes tend to have some similarities, the specific details of these taxes are extremely localized. How much you'll be expected to pay and who is responsible for payment can change drastically based on the state, city, and even the county in which you live.
Because transfer taxes are such an integral part of the home buying and selling process, it's critical to understand them well before you engage in a real estate transaction. Whether you're buying or selling, it's critical that you work with a local real estate agent who can help you through the process, explain transfer taxes, and ensure you understand the process completely.
By working with a reputable expert, you'll be able to ensure that you know what to expect and are prepared for the costs involved in transferring property in Florida.
Who Pays Transfer Taxes in Florida: The Buyer or the Seller?
In the state of Florida, transfer taxes are typically referred to as Documentary Stamps on the deed. To shorten this up, these taxes are referred to as the “Doc Stamps.”
In most cases, the seller is responsible for paying the Doc Stamps. However, responsibility for the transfer taxes can be transferred during closing negotiations. The final payee will be outlined in the contract.
How Much Are Transfer Taxes in Florida?
In Florida, transfer taxes aren't necessarily charged on every transfer of property. For instance, let's say you're adding a spouse to the deed as an owner — there won't be any need for Doc Stamps in that case.
Additionally, if you're transferring property between two people and the deed is simply being changed, even if a spouse isn't involved, you won't have to pay the transfer tax. Certain actions, like adding an executor or adding an owner to the deed, wouldn't be considered a transfer, so no transfer tax would be assessed.
If an actual transfer takes place, such as during a sale, then transfer taxes will be assessed. Those taxes are paid to individual counties, which then send them on to the State Department of Revenue. Florida transfer taxes are the same in every county with the exception of Miami-Dade.
Outside of Miami-Dade County
Outside of Miami-Dade County, the transfer tax rate is 70 cents per $100 of the deed's consideration. In other words, you can calculate the transfer tax in the following way:
(Total Price/$100) x .70 = Doc Stamps Cost
So, let's say you live in Key West. Since Key West is in Monroe County, you would be paying the non-Miami-Dade tax rate listed above. The median sale price in Key West is $716,135.
If you sold a home at the median sale price in Key West, you could figure out the transfer tax rate as follows.
($716,135/$100) x .70 = $5,012.95
You'd have to factor in a transfer tax of about $5,013. If you're the buyer, you probably won't have to worry about this tax. But if you're the seller, this could be an unexpected increase in the cost of selling your home were you were not aware of the tax before the sale.
That's why it's so important to understand transfer taxes and other real estate taxes before you go to make any home sale or purchase.
Within Miami-Dade County
If you live in Miami-Dade County, or you're transferring property here, you're in a bit of luck. The rate in this county is lower than it is in other counties in Florida. In Miami-Dade County, your rate is 60 cents per $100.
The median sale price in Miami is $370,738. Transfer taxes would come out to:
($370,738/$100) x .60 = $2,224.43
This just goes to show how dramatically different Florida transfer taxes can be based solely on where the transfer of property is taking place.
Usually, the seller's agent will obtain a check from the seller that covers the amount of the Doc Stamps before the deed is recorded. However, just because you're a buyer doesn't mean you're off the hook. In some cases, the buyer is responsible.
This is why it's important to talk to your real estate agent and obtain expert guidance throughout the home buying and home selling process.
Can You Deduct Transfer Taxes?
Usually, you can't deduct transfer taxes when it comes time to file your tax return. However, there are two potential situations in which you can still capture some tax savings.
Firstly, if you're using the property in question as a rental home or investment property, you can sometimes write it off as a business expense. If that's not possible, you can wrap those taxes into the cost basis of the property.
The cost basis of the property is basically what you had to pay in order to acquire the property, and is used to arrive at the amount of capital gains taxes you'll owe. Your capital gains are arrived by deducting the cost basis of your property from the total price, so including the cost of the Doc Stamps can be helpful in lowering these taxes.
Regardless of who pays the transfer taxes (or Doc Stamps), they're always paid at closing. On residential sales, the amount will be included on the HUD-1 settlement forms.
Real estate transactions are subject to federal and state taxes, as well, such as the capital gains tax mentioned above. If you have to pay capital gains taxes, those will be due at filing.
These are all costs that are important to consider and understand before buying or selling a home in Florida. That's why it's so important to work with a qualified, experienced real estate agent in your area.
Only an experienced agent can help you understand the fees and taxes that apply to your location, advocate for you through the process, and help you obtain the best outcome. Knowing what's ahead can help you plan accordingly so you don't run into any surprises that could be financially detrimental.
Real estate taxes are complicated, and it's easy to make costly mistakes. Partnering with a trusted agent can help you ensure that you have a successful and positive selling or buying experience in Florida.