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CandleFocus Glossary Editor
Transfer taxes, also known as stamp duty or transfer duty, are taxes imposed on a property's sale or transfer of ownership through a deed or title. Whether it be a commercial or residential property, almost all US states, as well as local governments, charge a transfer tax when a buyer and seller complete a sale, also known as a conveyance. The tax is typically based on a percentage of the value of the property, and the rate will depend on the jurisdiction in which the transfer is taking place.
State transfer taxes are made up of two parts: a fee paid to the state, and a local fee paid to a county or municipality. For example, in California, the state fee is calculated at 55 cents per $500 of the purchase price. So for a $500,000 property, the state fee calculation would be $550. In addition, the county or municipality will have its own fee rate, which may be slightly different from the amount charged by the state. In some cases, the state may exempt certain transfers from the transfer tax, such as those between family members, or where the grantor owns an undivided interest in the property.
In addition to state and local taxes, federal taxes may come into play depending on the circumstances of the transfer, such as an inheritance tax. An inheritance tax, also referred to as an estate tax, is a tax on the estate of a deceased person that must be paid by the person or persons who inherit the estate. The federal estate tax rate can range from 18% to 40%, depending on the value of the estate.
Ultimately, the amount of transfer tax due depends on a variety of factors, including the value of the property, who is involved in the sale or transfer, and the jurisdiction in which the transfer is taking place. It is important for buyers and sellers to take these taxes into account when determining the cost of a particular property or asset. Additionally, those involved in a transfer should consult with a qualified attorney or tax professional to ensure that they are properly handling the process and paying the applicable taxes.
State transfer taxes are made up of two parts: a fee paid to the state, and a local fee paid to a county or municipality. For example, in California, the state fee is calculated at 55 cents per $500 of the purchase price. So for a $500,000 property, the state fee calculation would be $550. In addition, the county or municipality will have its own fee rate, which may be slightly different from the amount charged by the state. In some cases, the state may exempt certain transfers from the transfer tax, such as those between family members, or where the grantor owns an undivided interest in the property.
In addition to state and local taxes, federal taxes may come into play depending on the circumstances of the transfer, such as an inheritance tax. An inheritance tax, also referred to as an estate tax, is a tax on the estate of a deceased person that must be paid by the person or persons who inherit the estate. The federal estate tax rate can range from 18% to 40%, depending on the value of the estate.
Ultimately, the amount of transfer tax due depends on a variety of factors, including the value of the property, who is involved in the sale or transfer, and the jurisdiction in which the transfer is taking place. It is important for buyers and sellers to take these taxes into account when determining the cost of a particular property or asset. Additionally, those involved in a transfer should consult with a qualified attorney or tax professional to ensure that they are properly handling the process and paying the applicable taxes.