Real Estate Transfer Tax
Real estate transfer tax is a tax that may be imposed by states, counties, or municipalities on the privilege of transferring real property within the jurisdiction. Total transfer taxes range from very small (for example, .01% in Colorado) to relatively large (2.2% in the District of Columbia).
Some states have a variety of transfer tax laws which may include specific exemptions for certain types of buyers based on buying status or income level (e.g. Maryland exempts certain “first time buyers” from a percentage of the total or excludes a portion of the property’s sales price from taxation altogether).
Another variation which exists is either the legal requirement to split the taxes between the parties or the local custom to do so. Thus, in Washington, DC, the 2.2% is generally split between the seller and the buyer. Prior to buying or selling, it is advisable to check with the Recorder of Deeds, a Realtor, or title company to confirm a specific jurisdiction’s practices.
There are some instances when payment of real estate transfer tax is exempted. Here are some common exceptions:
- Gifts
- Transfer of title to spouse due to divorce or nullity
- Transfer to the State
- Correction of deeds previously issued
- Purchased at tax sale
- Cemetery plots transfer
- Transfer by law regulation
- Transfer to a partner, in a partnership, due to death of a partner
- Initial sale of manufactured housing