What is a real estate transfer tax?
A real estate transfer tax is a one-time tax on the transfer of title to real property, based on the price or value of the property conveyed. There is no federal transfer tax. States, counties and cities levy it, and many collect it at the county recorder when the deed is filed.
The tax goes by many names: deed tax, documentary stamp tax, conveyance tax, real estate excise tax (REET) or realty transfer tax. Whatever it is called, it is a closing cost that comes straight out of the proceeds of whoever pays it, so it belongs in your net sheet before you sign a contract.
How is transfer tax calculated?
Most transfer taxes are a fixed amount per $100, $500 or $1,000 of the price, which works out to a flat percentage. New York charges $2 for each $500 of consideration, or 0.4%. Florida’s documentary stamp tax on deeds is 70 cents per $100, or 0.7%.
Other states use tiers. Washington’s REET is graduated like an income tax, so each slice of the price is taxed at its own rate, from 1.1% on the first $525,000 to 3% on the part above $3,025,000 for sales through 2026. A few places use a “whole price” tier instead, where crossing a threshold changes the rate on the entire price.
| Method | How it works | Example |
|---|---|---|
| Per $500 or $1,000 | A dollar amount for each $500 or $1,000 of price, rounded up | New York: $2 per $500 (0.4%) |
| Per $100 | A dollar or cents amount for each $100 of price | Florida: 70 cents per $100 (0.7%) on deeds |
| Graduated tiers | Each slice of the price taxed at its own rate | Washington REET: 1.1%, 1.28%, 2.75% and 3% slices |
| High-value add-on | Extra tax once the price crosses a threshold | New York mansion tax: 1% on residential sales of $1 million or more |
Who pays transfer tax?
Who pays transfer tax depends on state law and local custom, and in most places the contract can shift it. Some statutes name a payer. New York puts the base tax on the grantor, meaning the seller, and its mansion tax on the buyer. Washington’s Department of Revenue says the seller usually pays REET, and the buyer is responsible if the seller doesn’t.
In other states the custom is to split the tax or to have the buyer pay, and customs can differ from county to county. On an apartment building sale, who pays is a negotiable term. Put it in the letter of intent so it doesn’t become a surprise in escrow.
Local transfer taxes and add-ons
Local transfer taxes can cost more than the state tax. A city or county tax stacks on top of the state rate, and in some big cities the local share is the bigger one.
New York City adds its own real property transfer tax, and the state adds an extra base tax on New York City sales of $2 million or more for non-residential property and $3 million or more for residential property, at $1.25 per $500. Washington cities and counties levy a local REET on top of the state rate. Philadelphia, Los Angeles and other cities have their own transfer taxes, and Los Angeles’ Measure ULA charges higher rates on sales above thresholds set by the city.
Check the county and city where the building sits, not just the state. Your title or escrow company can quote the exact combined amount from the draft settlement statement.
Mansion taxes and high-value tiers
A mansion tax is an extra transfer tax on sales above a price threshold, usually aimed at expensive residences. New York’s mansion tax is 1% of the price on residential property sold for $1 million or more, and New York City adds a supplemental tax on residential sales of $2 million or more.
For apartment building sellers, the bigger issue is graduated rates. A large building lands in the top tier in states like Washington, and city surcharges like Los Angeles’ Measure ULA reach apartment buildings, not just houses. On a large sale, these tiers can move the transfer tax from a rounding error to a real share of your equity.
States with no real estate transfer tax
A number of states charge no statewide transfer tax on deeds, though recording fees still apply. Texas is the best-known example. Missouri and Montana have gone further and written bans on new real estate transfer taxes into their state constitutions.
Oregon law bars cities and counties from imposing a new transfer tax, but it grandfathered taxes that were in effect on March 31, 1997, which is why Washington County still collects one. That pattern is common: a state can have no tax of its own while a few local governments do.
No transfer tax doesn’t mean no closing costs. You still pay recording fees, title insurance and escrow fees, and buyers still price in property taxes, which can reset after a sale in some states.
Entity sales and controlling-interest transfer taxes
Selling the LLC or partnership that owns a building, instead of the building itself, often does not avoid transfer tax. Many states tax a transfer of a controlling interest in an entity that owns real estate as if the deed itself changed hands.
New York defines a controlling interest as 50% or more of the capital, profits or beneficial interest in an entity. Washington taxes the transfer of 50% or more of an entity’s ownership within a 36-month window, combining all transfers in that period, and the return is due within five days. Florida taxes transfers, within three years, of interests in a “conduit entity” that an owner deeded real property to without full consideration.
If you hold a building in an LLC with partners, plan any buyout or restructuring with these rules in mind. Several small transfers can add up to a taxable controlling interest.
Transfer tax exemptions that matter to investors
Most states exempt some transfers, but the lists differ, so read your state’s statute or ask your title company before you rely on one. These are the categories investors ask about most.
- Transfers to your own LLC: many states exempt a mere change in the form of ownership with no change in beneficial ownership. New York’s Tax Law 1405(b)(6) is one example.
- Gifts and transfers for no consideration: often exempt or taxed at a minimal amount, but some states tax based on value or assumed debt.
- Inheritance: transfers by will or from an estate are commonly exempt, and the heir may also receive a stepped-up basis for income tax.
- Foreclosures and deeds in lieu: treatment varies widely, and the debt satisfied can count as consideration.
- 1031 exchanges: usually not exempt, as the next section explains.
Does a 1031 exchange avoid transfer tax?
No, in most states a 1031 exchange defers federal income tax but not transfer tax. Both the sale of the relinquished property and the purchase of the replacement property are taxable conveyances, so you may face transfer tax on each side, depending on who customarily pays.
Washington’s rules show how this works. Under WAC 458-61A-213, an exchange facilitator’s acquisition of property in a Section 1031 exchange is subject to REET, and only the facilitator’s later transfer can qualify for an exemption if specific conditions are met. Plan for it in the exchange budget, and ask your qualified intermediary and CPA how closing costs paid from exchange funds will be treated.
Worked example: transfer tax on a $5,000,000 apartment building
Here is the state-level transfer tax on the same $5,000,000 apartment building sale in four places, using the rates above. Local add-ons are left out except where noted.
In Texas, the state transfer tax is $0. In New York outside New York City, $5,000,000 divided by $500 is 10,000 units, times $2 equals $20,000. In New York City, the state adds $1.25 per $500, bringing the state share to $32,500 before the city’s own transfer tax. In Florida, documentary stamps on the deed at the 70-cent rate are $35,000.
Washington’s graduated REET adds up slice by slice: $5,775 on the first $525,000, $12,800 on the next $1,000,000, $41,250 on the next $1,500,000 and $59,250 on the last $1,975,000. The state total is $119,075, an effective rate of about 2.38%, before local REET.
| Location | State-level rate | State transfer tax on $5,000,000 |
|---|---|---|
| Texas | None | $0 |
| New York (outside NYC) | $2 per $500 (0.4%) | $20,000 |
| New York City | $3.25 per $500 (0.65%), plus city tax | $32,500 plus city tax |
| Florida | 70 cents per $100 (0.7%) | $35,000 |
| Washington | Graduated 1.1% to 3% | $119,075 plus local REET |
How transfer tax fits with capital gains and other selling costs
Transfer tax is a closing cost, not an income tax, but it still touches your income tax. A seller-paid transfer tax is generally treated as a selling expense, which reduces the amount realized and therefore the capital gain. A buyer who pays transfer tax adds it to the property’s basis, as IRS Publication 551 lists transfer taxes among the settlement costs included in basis.
On a large apartment building sale, the full cost stack includes broker or marketing costs if any, transfer tax, title and escrow, loan payoff costs such as prepayment penalties, federal capital gains tax, depreciation recapture, the 3.8% net investment income tax where it applies and any state capital gains tax. A 1031 exchange or an installment sale can defer the income taxes, but neither removes the transfer tax.
Use the transfer tax calculator to estimate the tax at your price, then the capital gains tax calculator to see the rest of the bill.
Real estate transfer tax by state
Transfer tax rates, payers and local add-ons differ in every state, and a few states have no transfer tax at all. The table below shows the statewide rule for each state, with a link to a detailed page on how the tax works there.
The table shows the statewide tax only, for an investor selling a 5+ unit apartment building. County and city taxes come on top in many places, so open your state’s page for local rates, exemptions and a worked example, or run the numbers in the transfer tax calculator.
| State | Statewide rate | Who usually pays | State tax on a $2,000,000 sale |
|---|---|---|---|
| Alabama | 0.1% | Negotiable | $2,000 |
| Arizona | None | Negotiable | $0 |
| Arkansas | 0.33% | Split | $6,600 |
| California | 0.11% | Seller | $2,200 |
| Colorado | 0.01% | Negotiable | $200 |
| Connecticut | 0.75% | Seller | $15,000 |
| Delaware | 2.5% | Split | $50,000 |
| Florida | 0.7% | Seller | $14,000 |
| Georgia | 0.1% | Seller | $2,000 |
| Idaho | None | Negotiable | $0 |
| Illinois | 0.1% | Seller | $2,000 |
| Indiana | None | Negotiable | $0 |
| Iowa | Tiered, 0.16% to 0.16% | Seller | $3,199 |
| Kansas | None | Negotiable | $0 |
| Kentucky | 0.1% | Seller | $2,000 |
| Louisiana | None | Seller | $0 |
| Maine | Tiered, 0.44% to 1.2% | Split | $16,400 |
| Maryland | 0.5% | Split | $10,000 |
| Massachusetts | 0.456% | Seller | $9,120 |
| Michigan | 0.75% | Seller | $15,000 |
| Minnesota | 0.33% | Seller | $6,600 |
| Mississippi | None | Negotiable | $0 |
| Missouri | None | Negotiable | $0 |
| Montana | None | Negotiable | $0 |
| Nebraska | 0.332% | Seller | $6,640 |
| Nevada | 0.39% | Negotiable | $7,800 |
| New Hampshire | 1.5% | Split | $30,000 |
| New Jersey | Tiered, 0.58% to 1.21% | Seller | $21,675 |
| New Mexico | None | Negotiable | $0 |
| New York | 0.4% | Seller | $8,000 |
| North Carolina | 0.2% | Seller | $4,000 |
| North Dakota | None | Negotiable | $0 |
| Ohio | 0.1% | Seller | $2,000 |
| Oklahoma | 0.15% | Seller | $3,000 |
| Oregon | None | Negotiable | $0 |
| Pennsylvania | 1% | Split | $20,000 |
| South Carolina | 0.37% | Seller | $7,400 |
| South Dakota | 0.1% | Seller | $2,000 |
| Tennessee | 0.37% | Buyer | $7,400 |
| Texas | None | Negotiable | $0 |
| Utah | None | Negotiable | $0 |
| Vermont | 1.47% | Buyer | $29,400 |
| Virginia | 0.35% | Split | $7,000 |
| Washington | Tiered, 1.1% to 3% | Seller | $31,638 |
| West Virginia | 0.22% | Seller | $4,400 |
| Wisconsin | 0.3% | Seller | $6,000 |
| Wyoming | None | Negotiable | $0 |
Selling your apartment building to Skyline
Skyline Capital Investments buys apartment buildings with five or more units across the country. Our offers show the transfer tax and other closing costs, so you can compare net proceeds, not just the headline price.
We can buy for cash, offer seller-carry terms or work within a 1031 exchange timeline. Send the address and unit count through the form on this page or call (469) 660-2977. We typically respond within 48 hours.
