A documentary transfer tax is a tax that occurs each time a property is recorded and documented. To pay for the costs of documentation, the state charges a tax rate of $.55 for each $500 spent. The tax is paid upon transfer and can be paid either by the buyer, seller, or combination of both parties, and is dependent on negotiations.
A documentary transfer tax is a tax that cities and/or taxes impose on documents that transfer real property title from one party to another. The tax is imposed when the asset being transferred is valued at over $100.
The transfer tax rate is typically around $1.10 for each $1,000 being transferred, however the exact number is dependent on the city in which the property is being transferred.
Exemptions for Paying the Documentary Transfer Tax
There are a few exemptions that can exempt one from paying the documentary transfer tax. The exemptions are for transfers from a private individual to a government agency or locality, transfer of partnerships, transfers by death, transfers that are gifted, and documents that secure a debt such as a loan or mortgage.
Question and Answer
Question: Does a homeowner need to pay a transfer tax if the property is being transferred to a family member?
Answer: If there is no money or material item being exchanged, there is no need for a documentary transfer tax. Therefore, a transfer of property between family members would not be subject to pay the documentary transfer tax because such a transfer is a “gift.”
Example
The property on Almont Avenue is being sold for $925,000. The first loan of $495,000 is being assumed by the buyer and the rest will paid as a down payment. What is the transfer tax due to the buyer?
To begin calculating the transfer tax, subtract the assumed loan from the purchase price. Divide this figure by 500 (derived from the states formula) and multiply it by .55. The exact calculation can be seen below.
$925,000-$495,000 = $430,000
$430,000/$500 = $860
$860 (.55) = $473 transfer tax
