Among the many confusing fees and taxes you may be charged in a real estate transaction, you'll find transfer taxes. What is a transfer tax and who pays it? What can you expect to pay in Nevada if you're buying or selling a home?
What Are Real Estate Transfer Taxes?
Real estate transfer taxes are applied to a sale where real property changes hands. They help a city, state, or county cover the paperwork and other costs associated with the sale. The real estate transfer tax is expressed as a percentage of the total final selling price or the home's assessed value.
Real estate transfer taxes are separate from recording fees, mortgage fees, or title fees. You'll see them on a different line item on your closing documents.
Because these taxes vary between states, and on a regional and local level, it's important that buyers and sellers work with an experienced real estate agent to ensure they understand this process completely before selling or purchasing a property.
Who Pays Transfer Taxes in Nevada: the Buyer or the Seller?
Who pays the tax in Nevada is negotiable, though it's typically paid by the seller. Some new builders and housing developments refuse to pay it and make it the buyer's responsibility.
You don't have to pay the fee directly out of your own pocket, instead it's included in the closing costs which are rolled into your total mortgage. Your real estate agent should be able to answer any questions about the tax, and they also may suggest using it during negotiations to trade off for something you'd rather the buyer pay.
How Much Are Transfer Taxes in Nevada?
Nevada's statewide real property transfer tax is $1.95 per $500 of value over $100. Some counties in Nevada, such as Washoe and Churchill, add $0.10 to the rate. Clark County adds $0.60. The tax is collected by the county recorder.
In practical terms, if you buy a home for $200,000, your real estate transfer taxes will only be $780. While this isn't a huge amount of money when compared to a home's overall price, you should still weigh the difference in what you'll pay when deciding between houses or between selling prices.
There are exemptions to the real property transfer tax in Nevada. If the property is being transferred from a direct blood relative to another, there is no tax charged. The same applies if it's being transferred from a joint tenant to another joint tenant. A transfer in divorce or death is also not taxed.
In Nevada, either party or both involved in a home sale can pay the tax. Who pays often depends on if it's a buyer or seller's market, so this could be an item that your realtor can negotiate for you.
Can You Deduct Transfer Taxes?
Transfer taxes aren't deductible as a line item on your federal tax return. They can, however, be used to offset any gain on sale.
Capital gains are charged on the difference between what you paid for an asset and what you sell it for, i.e., your profit. Any profit on a home sale over $250,000 for a single person and $500,000 for a family is subject to capital gains.
You can offset this gain by including transfer taxes in the cost basis of your property. If you're the seller, add it to what you paid for the property originally. If you're the buyer, just remember to add them to your cost when you eventually sell.
A real estate transaction is subject to many fees and taxes that you may not be familiar with before entering the housing market. Who pays for what, and when, can impact the value you get when buying a new home or your profit when selling.
The real estate transfer tax can be added to your total mortgage when buying, or subtracted from your profit when selling. It will appear on your final HUD-1 form. It's just one of many line items on the form that may not make much sense to you.
Given the complexity of a real estate transaction and the amount of money involved, consider partnering with an experienced, local real estate agent to help you navigate the paperwork. Contact Clever today to be connected with an agent in your area.