Minnesota Real Estate Transfer Taxes: An In-Depth Guide

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By Jamie Ayers Updated March 15, 2023


Real estate transfer taxes are levied across the United States when a property is sold. There are many factors that come into play depending on the state in which the transaction occurs. Read on to find out about the payment of real estate transfer taxes in Minnesota.

Minnesota Real Estate Transfer Taxes: An In-Depth Guide

One of the taxes that come into play when you buy or sell a house is the real estate transfer tax. This is money owed to a state or county for changing the ownership of a property.

The amount owed in transfer taxes is always a percentage of the selling price of a house or its fair market value. Which party pays the money differs state by state. Here's what buyers and sellers in Minnesota need to know about transfer taxes.

Who Pays Transfer Taxes in Minnesota: the Buyer or the Seller

In Minnesota, transfer taxes are generally referred to as deed taxes. It is the party selling the property that foots the deed tax in the state. Sellers are required to make the payment at the time of closing.

The money that is collected in the form of transfer tax is directed to the county treasurer. 97% of the amount goes into the state general fund. The rest of the money is used by the county for administrative expenses.

How Much Are Transfer Taxes in Minnesota?

Now let's get to how much you'll pay in transfer taxes selling a house in Minnesota.

As this Minnesota Department of Revenue website states, the deed tax rate in the state is 0.33% of the net consideration, i.e. the price that was paid for the property in question. So if you sell a house for $200,000 in Minnesota, you would pay $660 in transfer taxes.

There is an additional tax that sellers in the counties of Hennepin and Ramsey have to pay in the form of an Environmental Response Fund (ERF) tax. The ERF tax has been set at 0.01% of the selling price. Selling a house worth $200,000 in Hennepin or Ramsey will incur $20 in ERF tax.

Can You Deduct Transfer Taxes?

Transfer taxes paid to the local county cannot be deducted from your income tax filing. What you can do as a seller in Minnesota is deduct the amount paid in transfer taxes from the effective selling price of the property.

The effective sale price becomes a consideration when computing capital gains tax. Capital gain is basically the difference between the original price of the home and its selling price. Since transfer taxes can be deducted from the capital gain, it is one of the ways sellers in Minnesota can reduce their tax exposure.

Other Considerations

Real estate transfer taxes are sorted out in Minnesota at the time of closing. There are ways in which you can qualify for a deed tax exemption, including through mortgages, leases, and mortgage dissolution decrees. Consult a local real estate agent to find out if you qualify for an exemption.

Both buyers and sellers can benefit from working with a local real estate agent while trying to make sense of the regulations associated with transfer taxes. Agents will be able to provide guidance on how to go about computing how much you owe, what the process is to make payments, and if there is a way you can be exempted from having to pay. Visit the Clever website to find a top-rated local real estate agent in your city.

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