Does Texas have a real estate transfer tax?
No. Texas does not charge a deed tax, documentary stamp tax or any other tax on the transfer of real estate, at the state, county or city level. A seller of a Texas apartment building pays no transfer tax, and neither does the buyer.
What makes Texas different from most no-tax states is that the answer is locked in. Article VIII, Section 29 of the Texas Constitution, approved by voters on November 3, 2015, says that after January 1, 2016, “no law may be enacted that imposes a transfer tax on a transaction that conveys fee simple title to real property.” A future Legislature or city council can’t add one without first amending the constitution again.
For an apartment seller this means one less number to negotiate. In states with a transfer tax, buyers and sellers argue over who pays it. In Texas, there is nothing to split.
What the constitutional ban covers, and what it doesn’t
Section 29 applies to transfer taxes on transactions that convey fee simple title. Subsection (b) of the amendment lists four things it does not prohibit:
- A general business tax measured by business activity.
- A tax on the production of minerals.
- A tax on the issuance of title insurance.
- A change in the rate of a tax that existed on January 1, 2016.
Why those exceptions matter to a seller
The first exception is the one most apartment owners run into. Texas’s franchise tax is a business tax measured by activity, and the ban leaves it alone. If your building is held in an LLC, limited partnership or corporation, the revenue from the sale can show up in the entity’s franchise tax report. That is not a transfer tax, but it is a state-level cost of selling through an entity, so ask your CPA to run it before you set a price.
The title insurance exception means a tax on issuing title policies stays permitted. The owner’s policy and the lender’s policy are normal Texas closing costs, and the purchase contract decides who pays for the owner’s policy.
The mineral exception matters mostly for land with mineral rights. It rarely touches a five-plus unit apartment sale, but if mineral rights are being conveyed with the property, have your title company flag them.
What sellers pay at closing instead
With no transfer tax, the government side of a Texas closing is mostly recording. The county clerk charges fees to record the deed, the buyer’s deed of trust and any release of your existing lien. Those fees are set per document and per page, so they are measured in dollars or hundreds of dollars, not thousands.
The larger closing items are private: the title policy, escrow and closing fees, any loan payoff and prepayment penalty, prorated property taxes and rents, and tenant security deposits transferred to the buyer. On most Texas apartment sales, the prorated property tax credit is a far bigger line than recording, because Texas relies on property tax rather than income or transfer taxes.
- Transfer tax: none, under Tex. Const. art. VIII, § 29.
- Recording fees: charged by the county clerk for each recorded document.
- Title policy: the purchase contract decides who pays for the owner’s policy.
- Property tax proration: usually a credit from seller to buyer at closing.
Are there county or city transfer taxes in Houston, Dallas or Austin?
No. The constitutional ban applies to any law imposing a transfer tax, which reaches counties and cities as well as the state. Houston, Dallas, San Antonio, Austin and Fort Worth all record deeds without a transfer tax.
That is a sharp contrast with cities such as Chicago or Philadelphia, where the local transfer tax on a large apartment sale can run into five figures. A Texas seller comparing offers from out-of-state buyers sometimes hears those buyers budget for a transfer tax out of habit. It is worth pointing out that the line should be zero.
Entity sales, LLC transfers, foreclosures and 1031 exchanges
Since there is no transfer tax, there are no transfer tax exemptions to qualify for. Deeding a building into your own LLC, transferring it to a partner, conveying it by deed in lieu of foreclosure or distributing it from an estate all record without a transfer tax.
The same goes for selling the entity instead of the building. Several states, including New York, Pennsylvania and Vermont, tax the sale of a controlling interest in an entity that owns real estate. Texas does not. Whether you sell the deed or the LLC membership interests, the transfer tax answer is the same, so the choice turns on liability, lender consent, title insurance and federal tax, not on transfer tax savings.
A 1031 exchange works the same way. There is no Texas transfer tax on the relinquished property sale or on the replacement purchase if it is also in Texas. If your replacement property is in another state, its transfer tax applies there, and that state may put it on the buyer, which would be you.
Worked example: a $2M and $5M Texas apartment sale
Take a 36-unit building in San Antonio sold for $2,000,000. The Texas transfer tax is $0. The same price in Oklahoma, at 75 cents per $500 of consideration, would carry $3,000 in documentary stamp tax. In Arkansas, at $3.30 per $1,000 in total, it would be $6,600.
At $5,000,000 the Texas figure is still $0, against $7,500 in Oklahoma and $16,500 in Arkansas. Recording fees in Texas are the same order of magnitude in both cases, since they are charged by the document, not by the price.
| Sale price | Texas | Oklahoma (0.15%) | Arkansas (0.33%) |
|---|---|---|---|
| $2,000,000 | $0 | $3,000 | $6,600 |
| $5,000,000 | $0 | $7,500 | $16,500 |
Texas compared with neighboring states
Texas is the only state in its neighborhood with a constitutional ban. Oklahoma and Arkansas both tax deeds by statute. The table shows their statewide rates.
| State | Statewide rate | Rule |
|---|---|---|
| Texas | None | Tex. Const. art. VIII, § 29 bars new transfer taxes after Jan. 1, 2016 |
| Oklahoma | $0.75 per $500 (0.15%) | 68 O.S. § 3201, on consideration excluding liens that stay on the property |
| Arkansas | $1.10 plus $2.20 per $1,000 (0.33%) | Ark. Code § 26-60-105; the $2.20 portion is paid by the purchaser |
How the missing transfer tax fits into your total tax bill
No transfer tax and no state income tax mean a Texas seller’s tax bill on an apartment sale is almost entirely federal. That includes capital gains on the appreciation, depreciation recapture on the deductions you took over the years and, for many owners, the net investment income tax.
Those federal items can be large, which is why 1031 exchanges are so common among Texas apartment owners. Identify replacement property within 45 days and close within 180, and the gain and recapture can be deferred. Because Texas adds no transfer tax at either end of an in-state exchange, the full equity can roll into the next property.
If you hold the building in an entity, add the franchise tax question to that list. It is the one state-level tax that the 2015 amendment leaves room for.
A Texas seller’s closing cost checklist
Because the transfer tax line is blank, Texas closing statements are easier to read than most. Use this list to check that nothing was carried over from an out-of-state template, and to make sure the costs that do apply are where you expect them.
Ask the title company for a draft settlement statement a week before closing. That is enough time to question a fee, confirm the payoff figure with your lender and line up the rent roll and deposit ledger the buyer will rely on.
- Confirm there is no transfer tax, deed stamp or excise line on either side of the statement.
- Check the recording fees for the deed and the release of your existing lien.
- Confirm who pays the owner’s title policy under your contract.
- Review the property tax proration, which is usually based on the current year’s estimated bill.
- Reconcile rents, tenant security deposits and any prepaid rent credited to the buyer.
- Get your lender’s payoff letter and any prepayment penalty or defeasance cost in writing.
- If you sell through an entity, ask your CPA about the franchise tax report for the year of sale.
Selling your Texas apartment building to Skyline
Skyline Capital Investments buys apartment buildings with five or more units across Texas, from Houston and Dallas–Fort Worth to San Antonio, Austin and smaller markets. We buy directly, can offer seller-carry terms and work inside 1031 deadlines.
Send the address and unit count through the form on this page, or call (469) 660-2977. We typically respond within 48 hours.
