Understanding San Francisco’s Transfer Tax: A Quick Guide
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Joseph Gordon Associate EditorJoseph Gordon is an Associate Editor with HomeLight. He has seven years of experience reporting on the commercial real estate and insurance industries. He holds an MFA in Creative Writing from the University of San Francisco.
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Selling your home in San Francisco? Understanding transfer taxes is important. Real estate transfer taxes are fees levied by the government when a property changes ownership. In this short guide, we’ll explain how transfer taxes work in San Francisco, detailing what sellers can expect to pay when selling their property.
Connect with a Top Agent to Help Maximize Value
Even rockstar agents can’t make your tax liability disappear, but HomeLight data shows that the top 5% of agents across the U.S. help clients sell their home for as much as 10% more than the average real estate agent, helping offset the tax bill.
What are transfer taxes?
The Federal Trade Commission describes transfer taxes as state or local taxes imposed when the ownership of a property changes hands. This means that when you transfer the title of your home, essentially your legal ownership, to another person, the government collects a fee for this transaction.
The amount you owe in transfer taxes depends on your property’s location, as different state, county, and city regulations apply. These taxes are a way for governments to generate revenue, similar to other types of taxes, and are important to consider when planning the sale of your property.
Who pays for transfer taxes?
Ultimately, the responsibility of a transfer tax will depend on where you are located. In some cities, it is up to the buyer and the seller to pay. However, in San Francisco, it falls to the seller. Therefore, if you are selling your home in San Francisco, it’s important to keep this in mind as you consider your bottom line.
What are the types of transfer taxes?
Transfer taxes are sometimes referred to by different names: documentary stamp tax, deed tax, and recordation tax are some examples. Ultimately, these amount to the same thing.
In California, the transfer tax you pay as a seller will depend on where you live. Here’s a look at how it works in San Francisco.
State transfer taxes
If you are selling a property in San Francisco, you are on the hook for the Golden State’s transfer tax, levied at a rate of $0.55 per every $500 of the home’s value. You will also be responsible for San Francisco-specific taxes as well.
City transfer taxes
Transfer taxes in San Francisco are dependent upon the total amount the home or property in question sells for. The amount you can be charged is as follows:
$100 to $250,000: $2.50 per $500 or portion thereof
$250,000 to $1,000,000: $3.40 per $500 or portion thereof
$1,000,000 to $5,000,000: $3.75 per $500 or portion thereof
$5,000,000 to $10,000,000: $11.25 per $500 or portion thereof
$10,000,000 to $25,000,000: $27.50 per $500 or portion thereof
$25,000,000 or more: $30.00 per $500 or portion thereof
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?
While transfer taxes themselves aren’t deductible on your tax return, there’s a potential silver lining for homeowners.
Capital gains taxes apply to profits made from selling a property, and transfer taxes count as part of the selling costs according to the IRS Transfer taxes as selling costs. This means you can subtract them from your home’s closing sale price, potentially reducing the amount of capital gains tax you owe capital gains. In essence, you’re decreasing your taxable profit.
Transfer tax exemptions
San Francisco offers transfer tax exemptions for the following property transfers:
- Transfers between spouses or domestic partners
- Gifts of property
- Inherited property
- Transfers involving refinancing, where no consideration is paid (e.g., adding or removing a co-signor/co-owner)
- Transfers between an individual and their own trust
- Transfers between an individual and their own LLC, LLP, or corporation
Estimating transfer taxes for your home sale
Here are some resources to help you estimate how much you might owe in transfer taxes:
- HomeLight’s Net Proceeds Calculator: This handy tool provides a quick estimate of your potential profit after factoring in closing costs, including transfer taxes, agent fees, and any renovations.
- Consult a Top Real Estate Agent: An experienced agent can provide a more detailed breakdown of your transfer tax liability, factoring in the specific sale price and current market conditions.
Transfer taxes are just one of the closing costs of selling a home. A skilled real estate agent can help you manage these costs and better understand your financial picture from the outset. Discussing transfer taxes with your agent early on will help you make informed decisions before closing the deal.
Header Image Source: (Daniel Abadia / Unsplash)
