Transfer tax is a one-time fee that allows you to add thousands of additional to your real estate transaction, depending on your location. Whether you’re buying brownstones in Brooklyn, New York or selling a ranch-style home in Tucson, Arizona, understand that transfer tax jobs can help you avoid unexpected costs and help you negotiate smarter.
This Redfin guide will analyze what your taxes are, who pays, how they cost and how they vary depending on the state and situation.
What is real estate transfer tax?
Transfer tax is a government-imposed fee for transfer of property ownership from one person or entity to another entity. In real estate, it is usually valued when a home or plot of land is sold and legally changed hands.
Transfer taxes are usually charged at the state, county, or local government level and are based on the sale or valuation of the property. These taxes are also referred to by other names, such as conduct tax, stamp tax, transportation tax, or real estate transfer tax, depending on your jurisdiction.
When will transfer tax be applied?
Transfer tax is most commonly applied during:
Residential Sales Commercial Real Estate Transactions Real Estate Succession Gift
Many buyers and sellers assume that these taxes are incorporated into other charges, but transfer taxes are usually charged separately and vary widely depending on the location of the property.
Who pays the transfer tax – who is the buyer or seller?
In most states, sellers are responsible for paying transfer taxes. However, liability may vary from location to location and may be split or negotiated between the buyer and seller.
Here are some examples::
California: Sellers usually pay county relocation taxes, but some cities add additional taxes that may be negotiated. Pennsylvania: Both buyers and sellers usually divide taxes evenly. Texas or Montana: No real estate transfer tax is charged at all.
It is important to check your purchase agreement and local regulations to determine who is on the hook.
How to calculate real estate transfer tax
Transfer tax costs vary depending on your location and the value of the property. The price is usually expressed as follows:
A percentage of the selling price (e.g. 0.5% to 2.0%), or a fixed amount per $100 or value of $500.
To calculate how much you will pay with transfer tax, please follow these steps:
Know the selling prices of real estate. Check your local transfer tax rate. Apply the rate. If the state charges 1.25%, multiply the selling price by 0.0125. Add additional municipal fees (some cities add their own fees). Check for exemptions or discounts. This is like a first-time buyer or family transfer.
Where will I be charged transfer tax?
14 states do not have statewide transfer taxes.
Alaska, Idaho, Indiana, Louisiana, Kansas, Mississippi, Missouri, Montana, New Mexico, North Dakota, Oregon (most counties), Texas, Utah, Wyoming.
These states have never banned or enacted such taxes. However, you may be charged a recording fee or other administrative fee upon closing.
Is transfer tax deductible?
Transfer taxes cannot be deducted on federal income tax returns. However, you can add it to the cost base of the property. This is especially useful for investors and homeowners who sell after a long period of ownership.
What is transfer tax on inheritance and gifts?
Traditional transfer taxes apply at the time of sale, but other types of taxes may apply if the property changes its hand through inheritance or gift.
Here are the types to note:
Property tax: paid by the deceased’s property. Applies only if the property exceeds the federal exemption. ($13.99 million in 2025) Inheritance tax: paid by the beneficiary. Only in some states, such as Maryland, Iowa and Kentucky. Gift Tax: Applies to property or money given to a person’s lifetime. Without causing this tax, in 2025 you can give up to $19,000 per recipient. Generation Skip Transfer (GST) Tax: Applies when assets skip generations (e.g., grandparents of grandparents). The same federal exemption as real estate tax.
These taxes aim to prevent real estate tax avoidance by passing assets across generations other than traditional wills.
How transfer tax will affect affordable prices in 2025
With mortgage fees fluctuating and home prices rising in many US markets, closing costs, including transfer tax, are taking a bigger sip from buyers and sellers’ budgets.
According to Redfin data, the median selling price for US homes for the first quarter of 2025 was $432,500. In states with a 1% transfer tax, this adds $4,325 to sales costs to the top of the Agents Commission and other fees.
Why pay to understand transfer tax?
Whether you are buying a home in Chicago or inheriting a San Diego property, knowing what the transfer tax is will help you better estimate your total transaction costs. These fees vary widely from state to state, and in high value markets, they can have a significant impact on revenue.
If you are unsure how transfer taxes apply to your particular situation, consult your local real estate agent or real estate attorney before closing.
Transfer Tax FAQ
What is the transfer tax when selling a house?
When an act or title is transferred to a new owner, they are a one-time fee charged by your local authority.
Is transfer tax the same as property tax?
No – Property tax is repeated, annual fees. Transfer tax will be charged once at the time of sale.
How can I avoid paying transfer tax?
Some transfers, such as between spouses and revocable trust, may be exempt. Check the state rules or talk to a real estate attorney.
Is transfer tax included in the closing costs?
yes. However, they are usually individually itemized and not bundled with mortgage-related expenses.
