Real estate transfer taxes are a one-time fee—a deed transfer tax—in reality. They are based on the purchase price of the property when it changes ownership. Charged by some states, counties, or cities, these non-federal fees are paid by the buyer or the seller or split between the two.
Also known as documentary stamp taxes or state documentary fees, the amount owed for real estate transfer fees varies widely. Due on closing day, or close of escrow, the fee can be as low as $50 on a $500,000 home in Colorado, or as high as $3,500 for the same home in Florida.
Unlike estate and gift taxes, real estate transfer taxes aren’t paid to the IRS. They’re paid to the taxing authority that levied the tax. In the case of inherited property, sometimes the tax could be reduced or waived if the recipient uses it for a primary residence.
If you’re buying property out of state and want more information, contact the state’s legislative or government website for property statutes.
