What is the transfer tax in Alabama?
Alabama charges a deed tax of $0.50 for each $500, or fraction of $500, of the value of property conveyed. That works out to $1 per $1,000, or 0.10%. The tax is set by Ala. Code § 40-22-1, which calls it a privilege or license tax on instruments that convey real or personal property in the state.
The rate is the same in all 67 counties. There’s no separate state and county piece to add up, and no graduated tiers for large commercial sales. A $500,000 fourplex and a $15 million apartment community pay the same percentage.
The probate judge in the county where the property sits collects the tax. No deed is recorded until it’s paid, so in practice the closing attorney or title company pays it out of closing funds when the deed goes to the probate office.
How the Alabama mortgage credit works
Alabama only taxes the value of a deed that exceeds any mortgage or vendor’s lien on which Alabama mortgage tax has been paid. Section 40-22-1(c) says so directly, and it’s the feature that makes Alabama different from almost every other transfer tax state.
Mortgages carry their own tax under Ala. Code § 40-22-2: $0.15 for each $100 of debt, or $1.50 per $1,000. The probate judge sends one-third of it to the county treasurer and two-thirds to the state. Because the state already taxes the loan, it doesn’t tax that same slice of value again on the deed.
Baldwin County’s probate office explains how this works when a deed and a new mortgage are recorded together. Mortgage tax is figured on the loan as usual, and deed tax applies only to the sales price above the mortgage amount, as long as the lender is a taxable lender and the mortgage tax is collected. Its own example uses a $125,000 price and a $50,000 loan, so deed tax is charged on the $75,000 difference.
For a seller, the practical point is that the deed tax on your sale depends partly on how your buyer pays. An all-cash buyer’s deed is taxed on the full price. A financed buyer’s deed is taxed on the equity portion, and the buyer pays mortgage tax on the loan.
Who pays the Alabama deed tax?
Alabama law doesn’t name a payer. It simply bars recording until the tax is paid, so the purchase contract decides. Title companies working in Alabama describe the buyer as the customary payer, and many investment property contracts follow that pattern, but it’s fully negotiable.
If you’re selling a larger building, settle the point in the letter of intent. On a $5 million sale the deed tax is only $5,000, so it’s rarely a deal breaker, but it shouldn’t be left for the closing statement.
The Real Estate Sales Validation Form
Every deed recorded in Alabama must show the purchase price or come with a Real Estate Sales Validation Form. Section 40-22-1 requires proof of the actual purchase price or actual value, on a form developed by the Alabama Department of Revenue, and county probate offices state that every deed needs the form filled out completely, signed and dated.
The form asks for the total purchase price, the actual value or the assessor’s market value. The person signing attests that it’s accurate. A 2018 Attorney General opinion (AGO 2018-34) says a probate judge without official knowledge of the property’s market value must accept the value on the form.
Getting it wrong is costly. Under § 40-22-1(h), intentionally failing to give the proof or giving false information carries a penalty of $100 or 25% of the tax due, whichever is greater. If no proof is offered at all, the tax is figured from the most recent assessed value, plus penalties.
Alabama sale prices end up in the public record through this process, which also gives county assessors fresh evidence of what apartment buildings are trading for. Expect the buyer’s property tax to be underwritten from the price on that form.
Recording fees and county charges in Alabama
Recording fees, unlike the deed tax, vary by county. Lauderdale County charges $16 for the first page of a standard document and $3 for each additional page. Baldwin County charges $3 per page plus a $5 data processing fee and a $5 archive fee per instrument.
Some counties also charge small add-ons. Baldwin County lists a mineral tax of $0.15 per acre when the grantor reserves minerals not reserved before, and some counties charge a $1 no-tax fee on exempt deeds. None of these change the math much on an apartment sale, but your title company will show them as separate lines.
Exemptions from the Alabama deed tax
Alabama’s exemption list is short. Section 40-22-1(b) exempts only a handful of instruments, and most ordinary investor transactions aren’t on it.
- Transfers of mortgages on which the mortgage tax has already been paid.
- Deeds or instruments executed for nominal consideration to perfect title to real estate.
- Re-recording of corrected mortgages, deeds or instruments made to perfect title, such as correcting maturity dates.
- Deeds and conveyances executed before October 1, 1923.
- Instruments conveying only leaseholds, easements or licenses don’t require proof of price or value.
Do LLC transfers, foreclosures and 1031 exchanges pay Alabama deed tax?
There’s no general exemption for deeding property into an LLC you own. When property isn’t sold, § 40-22-1 bases the tax on its actual value, so a contribution deed to your own entity can carry deed tax on the building’s value. At 0.10% that’s often a small price for the liability protection, but plan for it.
The tax attaches to an instrument offered for record. Alabama’s statute doesn’t contain a separate controlling-interest tax on sales of LLC membership interests, which some states use to tax entity sales the way they tax deeds. Have your closing attorney confirm how that applies to your structure.
Foreclosure deeds and deeds in lieu of foreclosure aren’t on the statutory exemption list, and neither are 1031 exchanges. A 1031 exchange defers federal and Alabama income tax on the gain, not the deed tax on the deed into the buyer or the deed into your replacement property.
Worked example: deed tax on a $2M and $5M Alabama apartment sale
Take a 30-unit building in Mobile selling for $2,000,000. If the buyer pays all cash, the deed tax is $2,000,000 ÷ $500 × $0.50, or $2,000.
Now say the buyer finances $1,400,000 with a bank loan recorded with the deed. Deed tax applies only to the $600,000 above the loan, so it falls to $600. The buyer pays mortgage tax on the loan: $1,400,000 ÷ $100 × $0.15, or $2,100. Total state-level tax on the closing is $2,700, compared with $2,000 for the cash deal.
At $5,000,000 all cash, deed tax is $5,000. With a $3,500,000 loan, deed tax drops to $1,500 and mortgage tax is $5,250. Either way, the transfer tax is a rounding error next to brokerage, title and income tax, which is why Alabama sellers rarely fight over it.
| Sale | Deed tax base | Deed tax | Mortgage tax (buyer’s loan) |
|---|---|---|---|
| $2,000,000 all cash | $2,000,000 | $2,000 | None |
| $2,000,000 with $1,400,000 loan | $600,000 | $600 | $2,100 |
| $5,000,000 all cash | $5,000,000 | $5,000 | None |
| $5,000,000 with $3,500,000 loan | $1,500,000 | $1,500 | $5,250 |
Alabama transfer tax compared with neighboring states
Alabama sits at the low end of the Southeast. Georgia’s rate is about the same, Tennessee’s is almost four times higher and Florida’s documentary stamp tax on deeds is seven times higher. Mississippi doesn’t have a state transfer tax.
If you’re selling in Alabama and exchanging into Tennessee or Florida, the transfer tax on the replacement deed can be larger than what you paid to sell, so budget for it in the exchange.
| State | Rate on a deed | As a percentage |
|---|---|---|
| Alabama | $0.50 per $500 | 0.10% |
| Georgia | $1.00 first $1,000, then $0.10 per $100 | 0.10% |
| Tennessee | $0.37 per $100 | 0.37% |
| Florida | $0.70 per $100 | 0.70% |
| Mississippi | No state transfer tax | 0% |
How the deed tax fits into your total selling costs
On an Alabama apartment sale, the deed tax is the smallest tax you’ll face. Federal capital gains tax of up to 20%, the 3.8% net investment income tax and depreciation recapture taxed at up to 25% all apply to the gain, and Alabama taxes capital gains as ordinary income at rates up to 5%.
A 1031 exchange can defer the income taxes, and an installment sale or seller financing can spread them out. Neither changes the deed tax. Ask your CPA to run the after-tax numbers alongside the closing statement, because that’s where the real money is.
Selling your Alabama apartment building to Skyline
Skyline Capital Investments buys apartment buildings with five or more units across Alabama, from Birmingham and Huntsville to Mobile and Montgomery. We buy directly, can offer seller-carry terms, and work within 1031 exchange timelines when you’re trading up.
Send us the property address and unit count through the form on this page, or call (469) 660-2977. We typically respond within 48 hours, and we’ll lay out how the deed tax and other closing costs are handled in our offer.
