Transfer taxes are charged by state and local governments whenever real estate changes hands. Learn more about this tax — including how it is calculated and if you have to pay it — to avoid surprises at closing.
Transfer taxes are fees charged on the exchange of home ownership. This tax is also referred to as a deed stamp tax, real estate conveyance tax or documentary stamp tax.
Transfer taxes are imposed by state, county and sometimes city governments. They are common, but not universal — in some areas, there are no transfer taxes at all — and rates vary widely across the U.S.
Taking the time to learn how transfer taxes work, how much they are in your area, and if you are expected to pay them can help you avoid surprises at the closing table. Read on — we'll cover everything you need to know to tackle your sale or purchase with confidence!
Here's what you need to know about transfer taxes:
- Transfer taxes are considered part of closing costs, meaning they are paid out when the home sale is finalized.
- In terms of costs, transfer taxes run the spectrum from hundreds to thousands of dollars depending on where the property is located.
- In most areas, the home seller is expected to pay for transfer taxes. However, who pays can vary by sale depending on local conventions.
» MORE: Who pays closing costs?
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How much do real estate transfer taxes cost?
Transfer taxes are calculated based on the sale price of your home, and can range from 0.01% to over 4%.
Exactly what your tax rate will be will depend on where you live: state, county, and city transfer taxes might all apply depending on the tax laws in your area. For details on your local transfer taxes, we recommend you use this fee calculator from First American Title.
The graphic below shows an example of how transfer tax costs can vary — in this case, by $2,400 — depending on your location.
|State transfer tax||$200 (0.1%)||$680 (0.34%)||None|
|County transfer tax||$100 (0.05%)||None||None|
|City transfer tax||$2,100 (1.05%)||None||None|
|Total transfer tax||$2,400 (1.2%)||$680 (0.34%)||None|
Note that transfer tax rates are often described in terms of the amount of tax charged per $500. For example in Michigan, state transfer taxes are levied at a rate of $3.75 for every $500 — which translates to an effective tax rate of 0.75% ($3.75 / $500 = 0.75%).
Transfer taxes by state
Below, we've listed the transfer tax rates for typical home sales in each state. Remember: just because you don't pay state transfer taxes doesn't mean that you won't still be on the hook at the county or city level.
|State||Transfer tax rate|
|Arizona||$2 (flat fee)|
|Connecticut||0.5% up to $800K and 1% of value over $800K; plus 0.11%|
|District of Columbia||1.1%|
|Hawaii||up to $600,000: 0.1%|
over $1,000,000: 0.3%
|New Jersey||0.04-1.21% (depending on sale price)|
|New York||up to $1,000,000: 0.4%|
over $1,000,000: 1.4%
|Vermont||0.5% on first $100,000 plus 1.25% on value over $100,000|
|Washington||first $500,000 in value taxed at 1.1%|
$500,000-1,500,000 taxed at 1.28%
$1,500,000-3,000,000 taxed at 2.75%
over $3,000,000 taxed at 3%
Who pays transfer taxes?
Who pays transfer taxes usually depends on what's customary in your area. In our research, we found that in 89% percent of cases the seller was expected to pay.
Here's how local conventions regarding transfer tax payments vary by state:
|States where the seller pays state transfer tax:|
|States where the buyer pays state transfer tax:|
|States where the buyer and seller split state transfer tax:|
One important thing to note: just because it is "typical" for you to pay for transfer taxes in your area, that doesn't mean you are required to do so! In most real estate transactions, the buyer and seller can negotiate who pays this tax.
There are some exceptions, however, where transfer taxes do come with a requirement for who pays. One example is Nebraska's state Documentary Stamp Tax, which specifies that the seller is charged.
Are deed transfer taxes deductible?
The short answer is no, real estate transfer taxes are not tax-deductible.
Unlike property taxes (which are different from real estate transfer taxes!) and mortgage interest, you can't reduce your tax bill by deducting transfer tax payments from your income.
However, you might be able to use transfer tax to save on future tax bills.
If you paid transfer taxes when buying your home, you can include them when calculating the total amount you paid for your home (this is called changing the “cost basis” of your home).
When you sell that home, you may have to pay capital gains taxes on the difference between the price you sold for, and the price you bought for. By calculating transfer taxes into the original purchase price, that difference becomes smaller.
Note that you won't be able to take advantage of this if:
- You're selling your primary residence, where you'd been living for at least two of the previous five years (which would make you eligible for a capital gain tax exclusion)
- You're making less than $250,000 on your home's sale if you're single, or $500,000 if you're married
For example, say you bought a house for $300,000 and then sold it $350,000 the next year. If you paid $5,000 in transfer taxes when you purchased the home, you could deduct that along with the other costs you incurred associated with the home (collectively known as the cost basis) to reduce the taxes you owe on the sale. Instead of paying taxes on a $50,000 gain, you would only pay taxes on a $45,000 gain.
If you're selling a rental or investment property you can also likely deduct the costs of transfer taxes in a similar fashion.
What are mortgage transfer taxes?
Mortgage transfer taxes — often referred to as mortgage recording taxes — are fees imposed by state and local governments whenever you take out a new mortgage. This fee is often charged alongside real estate transfer taxes.
In a typical home sale, it is customary for the buyer to pay this fee, since they are the one taking out the mortgage. However this isn't set in stone, and you can always negotiate who pays what in your sale.
Unlike real estate transfer taxes, mortgage transfer taxes are calculated as a percentage of the mortgage, instead of a percentage of the home's sale price.
You usually will pay a mortgage transfer tax any time you take out a loan on your home — for example, when refinancing our taking out a home equity loan — not only when taking out a mortgage to purchase a new home.