The transfer of title to real estate with consideration is taxed in many states. The methods and tax rates vary by state. Some states use "tax stamps" that are affixed to the deed and cancelled. Generally, the calculation begins with the purchase price of the property. Exemptions in some states include:
The balance owed on an assumed mortgage
Some states exempt property transfers below a certain stated dollar amount
Rates and methods of rate application also vary. They include:
A rate of $X for each $XXX or fractional part of the taxable value. Example: A rate of $0.90 for each $1000 of taxable value. Thus, if the taxable value is $225,000, the tax amount would be $0.90 X 225 = $202.50.
A percentage of the taxable value. Example: Using the same $225,000 taxable value sale, and a tax rate of .0055, the property transfer tax amount would be $1237.50.
For investors that are assuming mortgages, there are states that exempt the balance due on the mortgage from the taxable value, thus using only the cash paid at closing for the property transfer tax. Example: An investor is purchasing a property for $350,000, and is assuming the existing $218,000 mortgage. The tax rate is $0.45 per $500 or fraction thereof.
$350,000 - $218,000 = $132,000 taxable value.
$132,000 / $500 = 264
264 X $0.45 = $118.80 property transfer tax amount.
Remember that this varies by state, and also by area of the state in many cases. Check your state's rates and methods.
