US real estate transfer taxes: Understanding the impact
What are real estate transfer taxes?
Real estate transfer taxes are taxes levied on the transfer of ownership of real property. In the United States, 38 states levy transfer taxes – also known as recordation tax, conveyance tax, or deed stamp tax. Local governments, such as cities and counties, may also levy real estate transfer taxes. These local transfer taxes are generally in addition to any applicable state-level transfer taxes.
The total tax revenue collected from real estate transfer taxes is difficult to predict, as it depends on the volume of real estate transactions and the value of the transferred properties. That said, real estate transfer taxes can contribute a meaningful source of revenue for governments, particularly at the local level. For example, according to New York State tax collections data, real estate transfer taxes accounted for an average of 1.4% of total collections between 2018-2022, or an average of $1.2 billion per year. The amount raised annually can vary widely, however: in 2021 the amount of tax raised was $948 million and in 2022 it was more than $1.6 billion.
Existing real estate transfer taxes
Transfer taxes in most jurisdictions are set at less than 1% of the property’s value, and in many cases even lower. In recent years, however, a number of municipalities have looked to substantially increase transfer taxes on higher-valued properties. As noted above, transfer taxes can vary across state and local authorities. Examples of transfer taxes at the state, county, and city level in larger US markets are provided below:
State transfer taxes - examples
State | State transfer tax |
|---|---|
California | $1.1 per $1000 of value, or 0.11% of the selling price |
District of Columbia | 1.1% of fair market value of the property if less than $400,000, 1.45% if greater than $400,000 |
Illinois | $0.50 per $500 of value, or 0.10% of the value of the property |
Indiana | $0.55 per $500 of value, or 0.11% of the value of the property |
Kentucky | $0.50 per $500 of value, or 10% of the value of the property |
Maryland | 0.50% of the value of the property |
Massachusetts | $4.56 per $1000 value, or 0.46% of the value of the property |
Michigan | $7.50 per $1,000 of value, or 0.75% of the value of the property |
Missouri | $0.50 per $1,000 of value, or 0.05% of the value of the property |
Nevada | $1.30 per $500 of value, or 0.26% of the value of the property |
New Jersey | $4.00 per $1,000 to $12.10 per $1000 for consideration in excess of $1 million (.4% to 1.2%) |
New York | $4.00 per $1,000, $6.50 per $1000 of consideration for non-residential properties sold for more than $2 million (0.40%-.65%) |
North Dakota | $0.50 per $500 of value, or 0.10% of the value of the property |
Ohio | $1.00 per $1,000 of value, or 0.05% of the value of the property |
Oregon | $1.00 per $1,000 of value, or 0.1% of the value of the property |
Pennsylvania | 1.0% of the value of the property |
Washington State | 1.1% for consideration under $500,000, 1.28% up to $1.5 million, 2.75% up to $3 million, 3% over $3 million |
Wisconsin | $3.00 per $1,000 of value, or 0.30% of the value of the property |
States that don’t levy transfer taxes include Alaska, Idaho, Indiana, Louisiana, Mississippi, Missouri, Montana, New Mexico, Oregon, Texas, Utah and Wyoming – although there are some local governments within these states that do.
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County transfer taxes - examples
County | County transfer tax |
|---|---|
Cook County, Illinois | $.50 per $1,000 of value, or 0.75% of the value of the property |
Cuyahoga County, Ohio | 0.4% on the sale price or value of the property |
Kings County, New York | 1.50% of the value of the property |
Marion County, Indiana | $1.60 per $1000 of value, or 0.16% of the value of the property |
Florida Counties | .70% of the consideration paid, except Miami-Dade: 0.60% of the value of the property +.45% for non-residential |
Michigan Counties | $1.10 per $1000 of consideration paid |
Milwaukee County, Wisconsin | $3.00 per $1,000 of value, or 0.3% of the value of the property |
Montgomery County, Pennsylvania | 2% of the value of the property |
Nevada Counties | $.65/500 for up to 700,000 population (.13%), $1.25/500 for over 700,000 population (.25%) |
New Jersey Counties | 0.1%, plus 0.15% for values greater than $150,000, general purpose fee .18%-.43%, supplemental fee .05-.28% |
City transfer taxes - examples
City | City transfer tax |
|---|---|
Baltimore, Maryland | 1.50% of the value of the property |
Boston, Massachusetts | *Seeking to create 2% transfer tax on transactions over $2 million |
Chicago, Illinois | $10.50 per $1000 of value, or1.05% of the value of the property (seeking to increase to 2.95% for transactions over $1 million) |
Minneapolis, Minnesota | $5.00 per $1,000 of value, or 0.50% of the value of the property |
New York City, New York | 2.625% of the value of the property if valued over $500,000 |
Philadelphia, Pennsylvania | 3.278% of the value of the property |
San Francisco City and County, California Philadelphia, Pennsylvania | .5% for values up to $250,000, .68% up to $1 million, .75% up to $5 million, 2.3% up to $10 million, 5.5% up to $25 million, 6% for greater than $25 million. |
County or city transfer taxes are in addition to the transfer tax charged at the state level. This means that a purchaser in Baltimore will pay the .5% Maryland transfer tax plus the 1.5% Baltimore tax for a total of 2%. A purchaser in Philadelphia will pay 4.278% of the purchase price in transfer tax, and in San Francisco, would pay 6.11% in city and state transfer tax if the property value was greater than $25 million.
How do transfer taxes impact commercial real estate?
The impact of transfer taxes on real estate transaction volumes and market functions will depend on various factors, including the broader economic and market conditions, as well as the rate of the tax and the scope of its application. In the current volatile market, it is expected that high transfer taxes will contribute to lower sale volumes, price adjustments and reduced investment. For these reasons, many in the real estate industry oppose increases to transfer taxes.
For higher-valued properties in jurisdictions with high transfer tax rates, these taxes can significantly increase the costs of acquisitions. For example, a $10 million property in Philadelphia will pay almost half a million in transfer taxes to the state and the city.
High transfer taxes may discourage some buyers and sellers from participating in the market, resulting in less efficient markets, less price discovery, and overall lower transaction volume. Additionally, transfer taxes make certain types of transactions (such as high-value transactions or transactions involving certain types of properties) more expensive. In that case, they may distort market activity, leading to changes in the types of properties being traded and the prices at which they are sold.
High transfer tax rates substantially reduce the rate of return on an investment, which can discourage redevelopment of challenged assets. In today’s volatile market with increasing cost of debt, high transfer taxes may make projects such as conversion and redevelopment of obsolete assets unfeasible. This can have the unintended consequence of hampering the very initiatives some of these taxes are intended to finance, such as creation of affordable housing.
It is worth noting that the impact of transfer taxes on real estate transaction volumes and market functions can be complex and may vary depending on the market's specific characteristics and the transaction's nature. Transfer taxes may impact future property taxes, as the portion of the purchase price allocated to the real estate for purposes of calculating the transfer tax may become public record. This information is then accessible to assessors who are valuing the property for property tax purposes. While it is possible in some regions to challenge the amount of transfer tax, each jurisdiction has different rules and deadlines regarding reporting, collection and appeals. Expert assistance is always recommended.
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Authors
Omar Eltorai
Director of Research
Sandi Prendergast
Senior Director
Authors
Omar Eltorai
Director of Research
Sandi Prendergast
Senior Director