When you transfer ownership of real estate from one party to another, you will have to pay a transfer tax. It is imposed by municipalities, counties, and states for any real property within the jurisdiction.
Some other terms used to refer to transfer tax are document stamp tax, mortgage transfer tax, real estate conveyance tax, property transfer tax, and excise tax in other states. Two common types of transfer tax are estate tax and gift tax.
You can add your transfer tax on the sale of investment property and/or securities, but this is usually nondeductible.
In local municipalities and states, the transfer of legal deeds and property titles and certificates are taxed. The Internal Revenue Service taxes real estate through the gift or estate tax.
Who Pays Transfer Tax?
Traditionally, it is the seller who shoulders the cost. However, there are some instances where it is the buyer who will pay for this charge. One situation is if the purchaser has agreed to pay for all costs or for that particular expense during the negotiations.
Another instance is when you are buying a newly constructed house or building. In this case, the developer will pass on the transfer tax fees to you.
When buying real estate, make sure to check who will be responsible for paying this expense in all related documents before signing and closing the deal.
How Much Is Transfer Tax?
The amount you have to pay will depend on where your property is located. Therefore, it is best to check with your local agency to get a more accurate figure.