Whether you’re buying or selling, real estate transaction requirements are tricky as is and adding in another layer of tax requirements can be hard to navigate. When it comes to real estate transfer taxes in Nebraska, we can help.
When buying or selling a home in any state, there are tax consequences. If you’re unfamiliar with transfer taxes, or don’t know who pays them, this can add a layer of uncertainty around the sale price.
What Are Real Estate Transfer Taxes?
Transfer taxes include any type of tax that is levied on the transfer of property title or ownership from one owner or entity to another. These types of taxes vary at the state and local level, so it’s important that both buyers and sellers work with an experienced real estate agent to completely understand the process before closing on a sale.
In Nebraska, these transfer taxes are referred to as a Documentary Stamp Tax.
Who Pays Transfer Taxes in Nebraska: the Buyer or the Seller?
Every transaction is unique and is governed by the contract and its terms, as well as the laws governing all real estate transactions in that area. Unless otherwise stated in the contract, it is the seller’s responsibility to pay the transfer taxes and all attorney fees included in the state of Nebraska. The only time a seller will pay transfer taxes in Nebraska is if the cost is part of closing negotiations, and agreed upon and outlined in the written closing contract.
What falls under the buyer’s responsibility when it comes to transfer taxes is payment for the cost of preparing his or her financial papers, recording fees, and any attorney fees that the buyer agreed to or incurred.
How Much Are Transfer Taxes in Nebraska?
The Documentary Stamp Tax, or transfer tax, rate in Nebraska is $2.25 for every $1,000 value. The total amount taxed is based on the value of the property.
According to Nebraska law, transfer taxes must be paid by the time the deed is transferred and recorded. This deed itself is recorded at the cost of the buyer, though the taxes are to be paid by the seller.
Can You Deduct Transfer Taxes?
Unlike ordinary property tax, you can't deduct real estate transfer tax from your income tax return, according to the Internal Revenue Service. What you can do, however, is include them in what's called the cost basis, which is the amount you paid for the home.
Real estate taxes are included in the cost basis, which means they are deducted over the property’s lifetime. For example, let’s pretend you bought your home for $100,000 and are selling it for $150,000. You pay $4,000 in transfer taxes. You would then have a cost basis of $104,000 and can use this to calculate your capital gain cost.
When you sell your home, you're generally required to pay capital gains tax on the amount the home appreciated, or take a capital loss deduction if the property decreased in value. You find your capital gain by subtracting the cost basis from the sale price, so real estate transfer tax can ultimately decrease your income tax burden when you sell your home. For depreciation deductions, you can subtract the value of the land from the cost basis.
In most states, including Nebraska, transfer taxes are paid at the time the sale closes. This tax is always calculated based on the property value and its classification. If capital gains are to be paid by the seller, these will be due at the time you file your taxes.
It’s common in Nebraska to try to negotiate the transfer tax costs during closing so that the buyer pays a portion or all of the tax. A local, Nebraska real estate agent can help with these negotiations and all legal requirements that need to be sorted out. Buyers can work with a Clever Partner Agent to help navigate the complex maze of real estate transactions.
When you list your home with Clever, your Clever Partner Agent will help take care of this. Partner Agents’ discounted real estate commission fees will put more money back into your pocket, leaving you with more money for closing costs like transfer taxes. To get started, list with Clever.