County real estate transfer taxes in California are some of the lowest in the country. But, the additional local taxes in the specific area in which you buy or sell could more than make up for it. Here’s who typically foots the bill for transfer taxes and how much you can expect to pay.
Taxes make the world go round — and California transfer taxes make the purchase or sale of your property official. When a property goes from one person or entity to another, someone must file that paperwork and that somebody will charge you a transfer tax. When you close on a home, you can expect to see transfer tax listed as a line item in the final paperwork. Let’s look and at what these taxes are, who pays for them, and how they’re calculated.
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What Is Transfer Tax?
Transfer tax (or documentary transfer taxes, to be California official) is a tax you pay to a state, county, or city when transferring the title of a property from one person to another. The tax is based on the sale price and multiplied by the specific jurisdiction’s tax rate. Transfer taxes are a large source of revenue for the government.
Who Pays Transfer Tax in California?
While sellers typically pay the transfer tax amount in most U.S. states, California differs. Different areas in California have variable ways of doing things. In Northern California, the buyer normally pays. In Southern California, the seller typically does so. And in Central California, it can be a mixture of both. However, this can be negotiated, especially in a seller’s market, when a seller may find a buyer willing to do so.
How Much Is Transfer Tax In California?
The California Documentary Transfer Tax Act allows counties to charge transfer taxes up to 55 cents per $500 of property value — this equates to a tax rate of 0.11%. This is low compared to transfer taxes imposed in other states — the state of Washington, for example, has a tax rate of 1.28% plus local taxes.
But, a county transfer tax might not be the only amount included — most local municipalities also charge their own transfer tax besides the county’s tax. In Oakland, the fee gets stiffer as the home price gets higher. For a home sold for up to $300,000, the city imposes an additional tax of $10 per thousand — or 1%. Homes that sell for less than $1.5 million in Berkeley have a transfer tax of $15 per thousand — or 1.5%. In larger cities in California, you can expect to pay these taxes and the county transfer tax.
How Is Transfer Tax Calculated in California?
If you sell or buy a home in California, the purchase price will be rounded to the nearest $500. The taxable units can then be found by dividing the purchase price by $500. You’ll then multiply this amount by 55 cents, the county transfer tax in California. So, if you buy or sell your California home for $548,000 (the median home value in the state), the taxable units will be 1096 and the county transfer taxes will be $602.80.
Remember though, you’re likely to have to pay for local transfer taxes. In Berkeley, this would add $5,480, bringing your total real estate transfer tax to $6,082.80. Yeah, that’s a little hard to swallow. It’s best to check on the specific cost of the transfer taxes in the area in which you’re buying or selling so you know exactly what to expect, or just ask your real estate agent.
Are Transfer Taxes Tax-Deductible?
You cannot deduct California real estate transfer tax from your income tax return. Bummer. But, you can include them in the cost basis for the property, which is the amount you paid to acquire it. While this may not count for much, it is something and any little bit helps your tax bill. Your accountant can help you figure out how to do this, and they’ll have other questions related to your recent purchase or sale of a home.
Help With Transfer Taxes as a Buyer
If you’re thinking about purchasing a home and get queasy just thinking about dealing with all the paperwork and legal processes, make sure you enlist the help of a local, trusted real estate agent in California. Things can get real dicey, real quick if you don’t know what you’re doing.
Besides helping you uncover additional cost-savings opportunities, Clever Partner Agents also offer on-demand showings — sometimes in less than an hour — so you know you won’t miss out on your dream home. Plus, you’re eligible for a $1,000 buyer’s rebate on any home you purchase for more than $150,000 in California.
Help With Transfer Taxes as a Seller
Clever also works with major brands, like Century 21 and Keller Williams, to help sellers get a significant discount on commissions. Clever Partner Agents are top-rated real estate agents from these brands who are experts in their local markets. If you’re selling your home, Partner Agents offer the same full service as other agents, the only difference is that they have agreed to work for a flat fee of $3,500, or 1.5% if your home sells for more than $350,000.