Understanding Essex County’s Transfer Tax: A Quick Guide

What are the types of transfer taxes?

State transfer taxes

The New Jersey Department of Taxation mandates a Realty Transfer Fee (RTF) to be paid by sellers when recording a deed of sale for real property. This fee is determined either by the sale price mentioned in the deed or, in some cases, by the property’s assessed value divided by the Director’s Ratio.

The RTF is applicable to all actual property title transfers in New Jersey, with specific exemptions available. Sellers claiming any exemption from the RTF must submit an Affidavit of Consideration for Use by Seller (Form RTF-1) alongside the deed.

Rates will vary by the value of the property. For example, for properties valued below $350,000:

• $2.00/$500 of consideration not in excess of $150,000;
• $3.35/$500 of consideration in excess of $150,000 but not in excess of $200,000;
• $3.90/$500 of consideration in excess of $200,000 but not in excess of $350,000.

The rate increases for properties valued above $350,000.

• $2.90/$500 of consideration not in excess of $150,000;
• $4.25/$500 of consideration in excess of $150,000 but not in excess of $200,000;
• $4.80/$500 of consideration in excess of $200,000 but not in excess of $550,000;
• $5.30/$500 of consideration in excess of $550,000 but not in excess of $850,000;
• $5.80/$500 of consideration in excess of $850,000 but not in excess of $1,000,000;
• $6.05/$500 of consideration in excess of $1,000,000.

County transfer taxes

Realty transfer tax fees must be paid at the time of a property’s sale. For property’s sold above $150,000 in value, the tax fees are $2 per $500. The value changes depending on the amount the property is sold for:

• $3.35 per $500 of consideration not in excess of $150,000 but not more than $200,000
• $3.90 per $500 of consideration in excess of $200,000 but not more than $350,000

Other transfer fees

In addition to transfer taxes, there are possible fees to consider, such as from a homeowner’s association or another local neighborhood organization. Again, as these can vary heavily based on location, it’s important to consult a professional.

If you’re selling your home for sale by owner, consulting a professional might help with some of the finer points of the process and give you a better idea of what you can expect.

Additionally, New Jersey state will charge a fee for properties that are sold for more than $1,000,000. In this case, the buyer pays this supplemental fee of 1%. This feels also applies to:

• Class 2 residential;
• Class 3A, where the property is a farm (but only if the farmland contains a building or structure intended or suited for residential use);
• Class 4A commercial (other than industrial or apartment); and
• Class 4C cooperative units.

The buyer is also responsible for the Controlling Interest Transfer Tax (CITT), a 1% charge levied on transactions involving the acquisition of a controlling interest in an entity that owns real property, either directly or indirectly.

The CITT applies specifically when the property in question is classified as “4A Commercial,” and the transaction value or valuation exceeds $1 million. However, buyers can be exempt from the CITT if they cover an additional fee on transfers of certain real estate properties valued over $1 million.

Are transfer taxes deductible?

Transfer taxes do not qualify for tax deductions. Yet, there’s a silver lining: these taxes might help reduce your capital gains tax obligation. Capital gains are the profits from selling your property, similar to earnings from other assets, and are taxable at the federal level.

According to the IRS, sellers can consider transfer taxes as part of the property’s selling expenses. This allows sellers to deduct these costs from the home’s final sale price.

Consequently, this adjustment can lower the amount of capital gains taxes due to the profit from the sale. For more details on treating transfer taxes as selling costs, the IRS provides guidelines that can be beneficial for sellers aiming to optimize their tax outcomes.

Transfer tax exemptions

In some cases, you might be exempt from real estate transfer taxes. The Essex County Register of Deed and Mortgages FAQ page has a complete list. One possible exemption can include if the deed is a Quitclaim deed (when a deed is transferred between parties after the owner relinquishes, most commonly to a family member, for example.)

Estimating transfer taxes for your home sale

For a quick estimate of the potential proceeds from your home sale in Essex County, consider using HomeLight’s Net Proceeds Calculator. This tool helps sellers like you understand what you might earn after accounting for closing costs, including transfer taxes, agent commissions, and any pre-sale home improvements.

Moreover, engaging with a top real estate agent is invaluable for navigating the complexities of your home sale, especially regarding transfer taxes and other closing costs. While these fees are typically assigned to the buyer or seller, the actual responsibility can vary and may even be negotiable, depending on the current real estate market conditions.

A skilled agent can offer guidance on whether these costs can be negotiated and how to best approach this in your sales strategy. Partnering with an expert ensures you’re fully informed and prepared at every step of your home-selling journey.

​​Editor’s note: This post is for educational purposes only and does not constitute legal or financial advice. Links and mentions of Essex County area tax services or attorneys should not be considered endorsements.

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