What is a transfer tax?

A transfer tax is a state and local tax imposed on the transfer of real property from one owner to another. When property is sold or otherwise transferred, this tax is assessed based on the sale price or value of the property being transferred. It's typically paid at the time of closing and is usually calculated as a percentage of the property’s sales price. The revenue from this tax often goes to local or state governments, which can utilize the funds for various public services and projects.

Understanding that transfer taxes are specifically related to real estate transactions underscores the significance of recognizing them within the broader context of property sales and the various costs involved. Being familiar with how transfer taxes are administered in your specific jurisdiction, including rates and any exemptions or reductions that might apply, is crucial for real estate professionals and consumers alike.