Understanding Maine Transfer Tax: A Quick Guide

Who pays for transfer taxes?

In Maine, both the buyer and the seller are responsible for paying the transfer tax, with each paying one-half of the total tax, levied at a rate of $2.20 for each $500 or fractional part of $500 of the value of the property being transferred.

Let’s say you’re selling your Maine home for $390,000. Here’s how you can calculate the real estate transfer tax:

Step 1: Calculate the taxable units.

Each $500 of the sale price incurs a tax. So, we divide:

$390, 000 / 500 = 780 units

Step 2: Determine the total transfer tax.

780 units x $2.20 = $1,716

The total transfer tax is $1,716.

Step 3: Divide the tax between the buyer and the seller.

$1,716 / 2 = $858

When you sell your home in Maine for $390,000, you’ll incur a total transfer tax of $1,716, with you paying half of the share, which is $858.

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 Maine:

State transfer taxes

Two transaction types in Maine require a transfer tax. The first one, the sale of real estate, applies to every deed transferring property within the state. The register of deeds calculates the tax based on the property’s value as stated in the declaration of value.

The other one is transfer by controlling interest, which kicks in whenever someone gains or transfers a controlling stake in a business that owns real estate. If this happens, a separate Return/Declaration needs to be filed in the county where the property is located. The local register of deeds will then calculate and collect the tax based on the property’s declared value.

County transfer taxes

Transfer taxes in Maine will also vary by county. For example, in Somerset County, the transfer tax is calculated at $2.20 per $500 of the sale price or value, with all amounts rounded up to the nearest $500. In Cumberland County, the tax is calculated at a rate of $4.40 per thousand.

City transfer taxes

In Portland, Maine, the rate for transfer taxes is $2.20 for every $500 or part of the property’s value that’s being transferred. This tax is equally shared between the seller (grantor) and the buyer (grantee).

Other transfer fees

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

If you choose the For Sale By Owner (FSBO) route, consulting a professional might help you understand some of the finer points of the process and give you a better idea of what to expect.

Are transfer taxes deductible?

Unfortunately, transfer taxes cannot be directly deducted from your income tax return. However, there is a silver lining for sellers looking to minimize their tax obligations — by factoring in these costs when calculating capital gains.

Capital gains tax applies to the profit made from selling a property, just like earnings from other assets. The federal government taxes these gains, but sellers can reduce the taxable amount by including eligible selling expenses, such as transfer taxes and closing costs, in the capital gains calculation.

Capital gains are determined using the following formula:

Taxable Capital Gain = Sale Price − (Adjusted Cost Basis + Selling Expenses) 

So for example, suppose you purchased a home for $300,000 and later sold it for $500,000. If you paid $1,000 in transfer taxes and $15,000 in other selling expenses, your taxable gain would be:

$500,000 − ($300,000 + $1,000 + $15,000) = $184,000 

Instead of being taxed on the full $200,000 profit, your taxable gain is $184,000 because transfer taxes and selling costs reduce the amount subject to capital gains tax.

Now, many home sellers qualify for the capital gains tax exclusion, which can significantly reduce or eliminate their tax liability. If you meet the IRS requirements—owning the home for at least two years and using it as your primary residence for at least two of the past five years—you may qualify for:

• Up to $250,000 in tax-free profit if filing as a single taxpayer 
• Up to $500,000 in tax-free profit if filing jointly as a married couple

In our example above, since the taxable gain is $184,000, a single filer would owe no capital gains tax because it falls under the $250,000 exclusion limit.

Estimating transfer taxes for your home sale

For a quick and easy estimate of what you might make from your Maine home sale, consider using HomeLight’s Net Proceeds Calculator. This tool accounts for various closing costs, such as transfer taxes, agent fees, and any renovations, providing you with a quick view of your potential net proceeds.

Additionally, partner with a top real estate agent to better handle the complexities of transfer taxes and other closing expenses. Realtors possess the expertise to offer an accurate assessment of your potential costs and guide you through negotiations, potentially saving you money.

The amount you pay for transfer taxes can vary, and with the right guidance, you may be able to negotiate these costs to your advantage. Discussing transfer taxes with your agent early in the selling process ensures you have a clear understanding of your financial position when closing your home sale in Maine.

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