ABA Family Legal Guide

Buying and Selling a Home

Tax Considerations

Tax Considerations When Buying Your Home

What is a transfer tax?

A transfer tax is a tax paid for the privilege of transferring ownership of real property. Depending on the laws in your area, there are probably state or local transfer taxes due on the amount paid to purchase a home. If the home is financed, there may also be a documentary tax on the note or mortgage. The documentary tax is often applied to the recording of the promissory note or mortgage by the county clerk, and is often in the form of stamps that have to be purchased and affixed to the documents before they can be recorded. There may also be an intangible tax on the loan, another kind of fee for recording the mortgage. Generally, the seller pays the cost of the transfer tax, but in most cases it is negotiable. The buyer generally pays the cost of the documentary tax on the note or mortgage and the tax on the loan.