Transfer taxes, also called documentary stamps, excise taxes, or conveyance taxes depending on the jurisdiction, are paid when the deed is recorded. The tax rate and who pays it varies by state and local custom. Some common exemptions include transfers between spouses, transfers to government entities, and gifts.
A home sells for $300,000 in a state that charges a transfer tax of $2.00 per $1,000 of sale price. The transfer tax would be $300,000 / $1,000 x $2.00 = $600. At closing, the seller pays this tax when the deed is recorded at the county recorder's office.
Transfer tax calculations are common math problems on the exam. Know the formula: Sale Price / Tax Unit x Tax Rate = Transfer Tax. Exemptions are frequently tested — transfers by will, court order, or between spouses are typically EXEMPT. Remember that transfer tax is usually paid by the SELLER unless local custom dictates otherwise.
Related Terms
Related Concepts
A deed is a written legal document that conveys (transfers) ownership of real property from one party to another. It must be delivered to and accepted by the grantee to be effective.
A general warranty deed provides the greatest protection to the grantee by guaranteeing that the grantor holds clear title and has the right to sell the property. It includes covenants that protect against all defects in title, even those arising before the grantor owned the property.
A special warranty deed guarantees that the grantor has not caused any title defects during their period of ownership, but does not warrant against defects that existed before the grantor acquired the property.
A quitclaim deed transfers whatever interest the grantor may have in a property without making any warranties or guarantees about the quality of title. It offers the least protection to the grantee.
A bargain and sale deed implies that the grantor holds title and possession of the property but does not include warranties against encumbrances or title defects.
Frequently Asked Questions
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