Utah doesn't have a real estate transfer tax.
For the rest of the country, the average homeowner who purchases a $150,000 home will pay approximately $3,700 in closing costs. Included in these closing costs for people in most states is a real estate transfer tax.
The real estate transfer tax can go by many other names. Sometimes it is called the real estate transfer fee, deed tax, mortgage registry tax, or stamp tax. What is this fee?
This tax is collected whenever the ownership of a property changes. The money is for filing purposes and to fund future land development.
This tax, which can be collected by the city, county, or state (or all three), is usually based on a percentage of the sale price of your home. The largest entity (often the state) collects the funds and will pay the appropriate amount to the other branch of government.
What this means if you're a resident of Utah: when you buy or sell a piece of property in the state of Utah, you do not have to worry about the real estate transfer tax.
However, if you're worried about understanding closing costs in your area we recommend that you work with an experienced agent. Not only will an agent negotiate on your behalf, but also he or she will let you know what to expect during the closing process.
Ask your real estate agent what taxes and fees you will be paying during your closing.
Can You Deduct Transfer Taxes?
While property taxes may help relieve your tax bill at the end of the year, the state and county transfer taxes are not usually tax deductible. The IRS does not consider transfer tax a “sales tax.” It is assumed that the same will be true for Utah should the transfer tax pass.
In other states, if you are the seller, you can include the transfer tax in the “cost basis” of the property.
This is how it works:
Hopefully, when you sell a property, you will make money on the sale. You may be charged a capital gains tax on the amount of money that you made. The amount you spent on the transfer tax can be subtracted from your profit so that your capital gains tax bill can be reduced.
This reduction isn’t necessarily helpful in most cases. If you lived in the house for two of the last five years, a married couple could exclude $500,000 of capital gains anyway.
Very few people like to read and think about taxes. Since most people go through a house closing only a few times in their lives, they don’t find it necessary to memorize the details of the transfer tax laws. Most people in Utah probably don’t even know what transfer taxes are.
When learning about complicated issues like taxes and closing costs, sometimes it is easier to have a professional sit across the kitchen table from you to explain things. That’s why you should reach out to a Clever Partner Agent in Utah.
Whether you are buying or selling a home, your real estate agent will talk you through the process and make sure you understand all the different fees and taxes that you will be charged at closing. Your agent will also know the latest information regarding the real estate world.
One thing to remember, our agents often sell for a flat fee. Rest assured that’s one expense that won’t be a surprise on closing day.