What Are Transfer Taxes In Real Estate?

What are real estate transfer taxes?

Real estate transfer taxes are a one-time tax levied by a state or local government when a property changes hands. Depending on where you’re buying, selling or transfering property, they might be referred to as a deed transfer tax, documentary stamp tax or state documentary fee.

“A transfer tax may be levied from a government entity within the United States, including any city, county or state, but most real estate transfer taxes are generated by local governments,” says Paul Miller, CPA and managing partner of Miller & Company in New York City.

How do real estate transfer taxes work? Who pays transfer tax?

Real estate transfer taxes are typically calculated as a percentage of the property’s purchase price. The range can vary widely: A $500,000 home sale might incur just $50 in transfer taxes in Colorado, for example, where the rate is one cent for every $100 in value. In Florida, where the rate in most of the state is 70 cents per $100, the same sale would run $3,500.

The tax is usually due on closing day, and might be paid jointly by the buyer and seller, or by just one party.

“In some states, like Pennsylvania, this expense is typically split between the buyer and seller,” says Allen Popowitz, chair of the real estate practice at Brach Eichler law firm in Roseland, New Jersey. “In other states, and depending upon the strength of the real estate market, the tax is sometimes paid by the buyer.”

Not every state imposes a transfer tax, however.

States with no real estate transfer tax as of 2025

• Alaska
• Arizona
• Idaho
• Indiana
• Kansas
• Louisiana
• Mississippi
• Missouri
• Montana
• New Mexico
• Oregon (except for Washington County)
• Texas
• Utah
• Wyoming

The government that imposes the real estate transfer tax can use the funds collected for any reason or purpose they designate. This might include supporting local services such as transit systems, parks or schools.

How transfer tax differs from other types of real estate taxes

Real estate transfer taxes are different from property taxes, estate taxes and gift taxes, although it’s easy to confuse them. Here’s an overview of the distinctions:

• Property taxes: These are an annually recurring tax imposed on property owners as a source of revenue for local governments. Property tax rates vary considerably by state, and they tend to increase over time.
• Estate taxes: This tax is paid when the assets of a deceased party, or the estate, are transferred to their heirs. The assets might include real estate.
• Gift taxes: Gift taxes are paid when a gift of any kind of property is given to another without repayment, provided the gift is valued over a certain threshold.

Gift taxes and estate taxes may be paid when transferring ownership of a property, but there are key distinctions that separate them from a traditional transfer tax, according to Tania Bartolini, a real estate attorney based in Fort Lauderdale, Florida.

“Estate and gift taxes are technically transfer taxes,” Bartolini says, “but with different limitations and charges — and unlike real estate transfer taxes, they are paid to the IRS.”