Transfer Tax
A tax imposed by state or local governments when real property ownership is transferred, typically based on the sale price.
Full Definition
A transfer tax (also called a deed tax, conveyance tax, or real estate excise tax) is a tax levied by state, county, or municipal governments when real property is transferred from one owner to another. It is typically calculated as a percentage of the sale price or based on the sale price per unit value (e.g., $1.10 per $1,000 of value). Transfer tax rates vary significantly by state and locality. In many states, the transfer tax is customarily a seller expense, though local custom and contract terms can shift all or part of it to the buyer. Transfer taxes are recorded on the Closing Disclosure and are collected by the escrow agent or closing attorney at settlement.
Real-World Example
A state charges a transfer tax of $2.00 per $1,000 of sale price. On a $400,000 sale: $400,000 ÷ $1,000 × $2.00 = $800 transfer tax.
How Transfer Tax Appears on the Real Estate Exam
Common question types, tested concepts, and what to watch out for
Transfer tax = (Sale Price ÷ Unit Value) × Tax Rate per unit. Know that rates vary by state and that it is typically a seller expense but may vary by contract or local custom. Also called documentary stamp tax in some states (e.g., Florida).
Related Terms
More Closing & Settlement Terms
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