Understanding Florida’s Real Estate Transfer Tax: A Quick Guide
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Joseph Gordon EditorJoseph Gordon is an Editor with HomeLight. He has several years of experience reporting on the commercial real estate and insurance industries.
Selling a home in Florida can be expensive, and there are a lot of fees and costs to consider. One you might not have considered is the real estate transfer tax. This tax is levied on the transfer of property ownership and is an essential cost for sellers to consider. In Florida, transfer taxes can vary based on the location and specific details of the property transaction.
Our guide will offer a look at how transfer taxes work in Florida. We will explore the different types of transfer taxes, who is responsible for paying them, and provide insights on possible exemptions and deductions.
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Disclaimer: This post is for educational purposes only and does not constitute legal or financial advice. Links and mentions of Florida area tax services or attorneys should not be considered endorsements.
What are transfer taxes?
Real estate transfer taxes are state or local taxes that are imposed when the ownership of a property is transferred from one person to another. According to the Federal Trade Commission, this tax is due when the title of a property—essentially the official rights to ownership—changes hands. This tax is a standard part of real estate transactions and is calculated based on the property’s sale price or assessed value.
In Florida, this is referred to as a Documentary Stamp tax, though it is functionally the same as a real estate transfer tax. Transfer taxes are also sometimes referred to as a “mortgage registry tax” or “deed tax.”
The specific amount owed in transfer taxes can vary significantly depending on the property’s location. Different states, counties, and cities will have their own rates and rules governing these taxes, so there’s no “one size fits all” solution.
Transfer taxes are a way for local governments to generate revenue, supporting essential public services. These taxes are important to consider for anyone involved in a property transaction, influencing the overall cost of transferring property ownership.
Who pays for transfer taxes?
In the Sunshine State, all parties involved in the transaction are liable for the transfer tax when real estate changes hands, regardless of which party decides to pay the tax. It’s important to hammer out the details of the seller agreement to make sure that the transfer tax is paid—otherwise, you will be held responsible for fees and penalties.
In the case of one party on the document being exempt from the state’s transfer tax, a non-exempt party involved in the transaction will be response for the fee.
What are the types of transfer taxes?
Transfer taxes will typically vary based on local guidelines but can generally be broken down into three categories — state, city, and county, depending on the state. Here’s a quick look at how it works in Florida.
State transfer taxes
Statewide, real estate transfers are taxed at a rate of $0.70 per $100 of the total value of the property.
There are exceptions to this, however. In Miami-Dade County, for example, the rate drops to $0.60 per $100 for single-family homes. For other property types in Miami-Dade County, the tax is levied at a rate of $0.60, plus a $0.45 surtax per $100 of value.
County transfer taxes
Miami-Date County is the only Florida county that allows for a variation to statewide transfer tax rates, in addition to an extra surtax.
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.
Are transfer taxes deductible?
Transfer taxes are not deductible from your income taxes. However, they can be used strategically to reduce your capital gains tax liability. Capital gains refer to the profit you make from selling your property, which, like other forms of income, is subject to federal taxes. According to the IRS, sellers can include paid transfer taxes as part of their selling costs.
Florida does not have a state income tax, so at the state level, you won’t owe anything from capital gains earned in a given year. You will still be on the hook at the federal level, however.
By adding these taxes to the total expenses of selling a home, sellers can effectively lower their reported profit from the sale, thereby reducing the amount of capital gains taxes owed. This method can be a significant financial benefit during tax season, providing some relief despite the initial un-deductibility of the transfer taxes. More details on treating transfer taxes as selling costs can be found in IRS guidelines.
Transfer tax exemptions
Some Florida home sellers might be eligible for exemptions from transfer taxes, depending on the circumstances or the nature of the transaction. Here are some instances where exemptions apply:
- Government entities such as U.S. government agencies or local government bodies like counties, municipalities, and their political subdivisions are not required to pay transfer taxes in the Sunshine State. If involved in a transaction where the other party is exempt, the non-exempt party must pay the tax.
Other transaction types that are exempt from transfer taxes in Florida include:
- Transfers related to the dissolution of marriage from one spouse to another.
- Property transfers into irrevocable or living trusts for estate planning purposes.
- Home sales prompted by job relocation.
- Gifts of property where no financial consideration is exchanged.
- Transfers of property from non-profit organizations to governmental entities.
Estimating transfer taxes for your home sale
Estimating the transfer taxes for your home sale in Florida can be a critical step in understanding your financial position upon closing. Utilize HomeLight’s Net Proceeds Calculator to get a quick and comprehensive estimate of what you might earn from selling your home.
This tool accounts for various closing costs, including transfer taxes, agent fees, and any necessary home improvements, providing you with a detailed picture of your net proceeds.
Additionally, for a precise evaluation of your potential transfer taxes and other closing costs, it’s good to consult with a top real estate agent. A skilled agent can offer valuable insights into the local market and help negotiate these costs effectively.
Their expertise can be instrumental in managing negotiations where transfer taxes and other expenses might be shared or shifted between the buyer and seller, depending on the market dynamics.
Header Image Source: (Kian Lem / Unsplash)
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