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Real Estate Transfer Taxes

Posted by attorney Matthew Quick

Real estate transfer taxes are taxes imposed when property is transferred. In Illinois and Michigan the tax is assessed by an ad valorem (according to worth) tax that is based on the value of the property transferred. In some states, however, such as Vermont, a transfer tax is only imposed on gain from the sale; and in other states, such as Indiana, there is no transfer tax.

In Illinois and Michigan, the transfer tax is stated as a fee. For example, in Michigan the state fee for transfer is $3.75 for every $500 of the purchase price, which is equivalent to .75% of the purchase price. Therefore, to calculate the fee, take the purchase price and divide by $500, then multiply the quotient by $3.75 (or simply multiply the purchase price by .0075).

State and local laws may or may not stipulate which party is responsible for paying the tax. In addition, both Illinois and Michigan provide a number of exempted transfers that are not taxed, such as transfers where the consideration is less than $100.

Real estate transfer taxes involve basic mathematics, but the rates and responsibility for such can get confusing and require attention. If any questions arise, please consult a real estate professional.

Additional resources provided by the author

For more on real estate closings: http://attorneymatthewquick.com/?p=746
For more on real estate taxes: http://attorneymatthewquick.com/?p=692
For more on federal tax on sale of main home: http://attorneymatthewquick.com/?p=397

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