There are three main kinds of real estate taxes you'll have to worry about when selling, buying, or simply owning a home:
Property taxes are taxes set by the county and/or the local municipality where the home is located. This expense varies greatly from one area to another, across the country and even within the same state.
Transfer taxes are taxes imposed by some states when transferring property from one owner to another. Some states use different terms for this tax, such as documentary stamp taxes or recordation taxes. A handful of states don't have any transfer taxes.
Capital gains taxes are taxes on the profits made from selling a property. Capital gains above a certain amount are taxed at the federal level. Some states impose a capital gains tax, as well. Fortunately, the typical home sale is exempt, meaning most sellers won't owe capital gains taxes.
Find out about tax rates, exemptions, and other tax rules in your state:
Property taxes
Property taxes are set by a local jurisdiction, such as a county or a municipality. These types of taxes vary greatly from one area to another.
For example, property taxes in rural Alabama are much lower than they are in a seaside resort town in New Jersey. Because property values and effective tax rates are much higher there, a New Jersey property tax bill is exponentially higher than an Alabama bill.
| Location | Effective property tax rate | Typical cost |
|---|---|---|
| Choctaw County, AL | 0.22% | $518 |
| Cape May County, NJ | 3.27% | $18,469 |
Property taxes and assessed value
When calculating your property taxes, local tax authorities rely on what's called the assessed value of your home. This figure serves as the foundation for calculating your annual property tax bill.
Assessed value is determined by municipal assessors who perform a physical inspection of your property or an evaluation based on available public records and comparable sales data in your area.
It's important to distinguish assessed value from two other common property valuations:
- Market value represents what your home would realistically sell for in today's real estate market.
- Appraised value reflects a licensed appraiser's professional opinion of your property's worth, often used for mortgage lending.
How property tax bills are calculated
When calculating property taxes, two additional key variables significantly impact your final bill:
- Assessment rate: This percentage determines what portion of your property's assessed value is actually subject to taxation.
- Mill rate: This is the tax rate applied to your property's taxable assessed value.
Assessment rates can span anywhere from 10–100% of a property's assessed value, while mill rates are set independently by each taxing authority.
Multiply your assessed value by the tax rate to estimate your tax bill. Here's an example:
| Market value: $300,000 | What the home would likely sell for on the current market. |
| Assessment rate: 60% | In this example, the local tax authority assesses homes at 60% of their market rate. |
| Assessed value: $180,000 | Market rate multiplied by assessment rate. |
| Tax rate: 4 mills (0.4%) | One mill = one-tenth of one cent. In this example, a homeowner is taxed $4 for every $1,000 of the assessed value. |
| $7,200 total taxes due | Assessed value ($180,000) x property tax rate (0.4%) = property taxes due |
How to lower your property tax bill
Most states offer a homestead deduction that allows homeowners to deduct a certain amount of assessed value on their primary residence. Exemptions for veterans, senior citizens, and other groups are common as well.
Homeowners preparing to sell their property may qualify for tax deductions. Only renovations and fixes that directly relate to preparing your property for market may qualify, so keep all receipts.
Homeowners can also deduct mortgage interest payments on loan amounts up to $750,000 for their main residence plus one additional property when filing their annual returns. Those married but filing separate returns can deduct interest on up to $375,000 in mortgage debt.
Your primary residence must satisfy these conditions to qualify:
- Property type includes houses, condominiums, cooperatives, mobile homes, trailers, houseboats, or apartments
- The property serves as collateral securing your mortgage loan
- The dwelling contains essential living amenities: sleeping quarters, kitchen facilities, and bathroom access
For vacation homes or investment properties to qualify for interest deductions, the property must be collateral for the loan. If you rent out your second home, you must use the home yourself for a minimum of 14 days or more than 10% of the rental time to qualify.[2]
Transfer taxes
Transfer taxes are fees charged by the state or local government to transfer property from one entity to another. They are due at closing. In most states, the seller is expected to pay, but this is usually negotiable.
Some states call their transfer tax by a different name, such as a documentary stamp tax or recordation tax.
| State | Tax name | Rate | Who pays? |
|---|---|---|---|
| Alabama | Recordation tax | 0.10% | Buyer |
| Alaska | No transfer tax in Alaska | — | — |
| Arizona | No transfer tax in Arizona | — | — |
| Arkansas | Transfer tax | 0.33% | Seller |
| California | Transfer tax | 0.11% | Seller |
| Colorado | Documentary fee | 0.02% | Buyer |
| Connecticut | Conveyance tax | 1.00% | Seller |
| Delaware | Transfer tax | 4.00% | Split |
| Florida | Documentary stamp tax | 0.70% | Seller |
| Georgia | Real estate transfer tax | 0.10% | Seller |
| Hawaii | Conveyance tax | 0.20% | Seller |
| Idaho | No transfer tax in Idaho | — | — |
| Illinois | Real estate transfer tax | 0.15% | Seller |
| Indiana | No transfer tax in Indiana | — | — |
| Iowa | Transfer tax | 0.16% | Buyer |
| Kansas | No transfer tax in Kansas | — | — |
| Kentucky | Real estate transfer tax | 0.10% | Seller |
| Louisiana | No transfer tax in Louisiana | — | — |
| Maine | Transfer tax | 0.44% | Split |
| Maryland | Transfer tax | 0.50% | Split |
| Massachusetts | Transfer tax | 0.46% | Seller |
| Michigan | Real estate transfer tax | 0.86% | Seller |
| Minnesota | Transfer tax | 0.33% | Seller |
| Mississippi | No transfer tax in Mississippi | — | — |
| Missouri | No transfer tax in Missouri | — | — |
| Montana | No transfer tax in Montana | — | — |
| Nebraska | Documentary stamp tax | 0.23% | Seller |
| Nevada | Transfer tax | 0.39% | Seller |
| New Hampshire | Real estate transfer tax | 0.75% | Split |
| New Jersey | Transfer tax | 0.80% | Seller |
| New Mexico | No transfer tax in New Mexico | — | — |
| New York | Real estate transfer tax | 0.40% | Seller |
| North Carolina | Transfer tax | 0.20% | Seller |
| North Dakota | No transfer tax in North Dakota | — | — |
| Ohio | Conveyance fee | 0.10% | Seller |
| Oklahoma | Documentary stamp tax | 0.15% | Seller |
| Oregon (Washington County only) | Transfer tax | 0.10% | Split |
| Pennsylvania | Realty transfer tax | 2.00% | Split |
| Rhode Island | Conveyance tax | 0.40% | Seller |
| South Carolina | Deed recording fee | 0.37% | Seller |
| South Dakota | Real estate transfer fee | 0.10% | Seller |
| Tennessee | Recordation tax | 0.37% | Buyer |
| Texas | No transfer tax in Texas | — | — |
| Utah | No transfer tax in Utah | — | — |
| Vermont | Property transfer tax | 1.20% | Buyer |
| Virginia | Recordation tax | 0.35% | Split |
| Washington | REET (real estate excise tax) | 1.10% | Seller |
| Washington DC | Recordation tax | 1.10% | Buyer |
| West Virginia | Transfer tax | 0.22% | Seller |
| Wisconsin | Deed transfer tax | 0.33% | Seller |
| Wyoming | No transfer tax in Wyoming | — | — |
Capital gains taxes
Capital gains are profits from selling an asset. In most states, and at the federal level, these profits are taxed as income.
Federal capital gains taxes
Fortunately, most homeowners are exempt from owing capital gains taxes when selling their home, as long as it's their primary residence.
If you have lived in your home for at least two of the last five years, you can exclude up to $250,000 in profits, or up to $500,000 if filing jointly with your spouse.[3]
In 2024, the average home sale netted the seller just under $125,000 in profits.[4] This is well below the IRS's exemption threshold.
However, if you make a large profit after living in the home for less than two years, you may owe taxes on those gains at a rate based on your income:
A capital gains rate of 0% applies if your taxable income is less than or equal to:
-
- $48,350 for single and married filing separately
-
- $96,700 for married filing jointly and qualifying surviving spouse; and
-
- $64,750 for head of household.
A capital gains rate of 15% applies if your taxable income is:
-
- More than $48,350 but less than or equal to $533,400 for single;
-
- More than $48,350 but less than or equal to $300,000 for married filing separately;
-
- More than $96,700 but less than or equal to $600,050 for married filing jointly and qualifying surviving spouse; and
-
- More than $64,750 but less than or equal to $566,700 for head of household.
However, a capital gains rate of 20% applies to the extent that your taxable income exceeds the thresholds set for the 15% capital gain rate.[1]
State capital gains taxes
Most states tax capital gains as income on top of federal taxes. Find out how your state's capital gains rules work:
How to reduce capital gains taxes
With careful planning, you may be able to reduce or avoid capital gains taxes when selling a house.
Like any other investment, you can deduct certain costs from your profits when selling a home. The IRS allows you to deduct expenses from permanent improvements to a property when calculating the total gain.
For more information on determining your gain or loss, as well as eligibility requirements for this exclusion, see IRS Publication 523, "Selling Your Home."
Methodology
The Clever team of researchers gathered data for property taxes, transfer taxes, and capital gains rules using publicly available information from government websites.
Additionally, we utilized the following data:
- Home values, list prices, and sale prices: Based on Zillow data as of May 2025.
- Transfer taxes and mortgage taxes: Based on public data as of February 2024.
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Our team of industry-leading researchers is committed to making homeownership more accessible by educating buyers through guides like this one. We've spent thousands of hours analyzing publicly available data, surveying consumers, and interviewing industry experts. Our research has been featured in The New York Times, Business Insider, Inman, Housing Wire, and many more.
