Key Takeaways
- A conveyance tax is a tax imposed on the transfer of real property, calculated as a percentage of the sale price.
- It is also known as a real estate transfer tax and is applied at the state, county, or municipal level.
- Transfers of property for low amounts or between family members might be exempt from this tax, although estate taxes could still apply.
What Is a Conveyance Tax?
Conveyance tax is imposed on the transfer of real property at the state, county, or municipal level. The conveyance tax is also known as a real estate transfer tax. This tax is generally calculated as a percentage of the sale price.
If the property is sold for a very low amount or is transferred for free, such as between family members, it may be exempt from conveyance tax but could still be subject to estate tax. This could occur if the property is transferred to a beneficiary after the death of the owner.
When Does Conveyance Tax Apply?
In some jurisdictions, the conveyance tax increases as the property’s sale price increases. In other jurisdictions, it is a flat rate. The conveyance tax rate may also depend on the type of property, such as residential, nonresidential, or unimproved land. While state and municipal conveyance taxes are common, there are no applicable federal conveyance taxes. As of 2024, these states did not incur this tax:
- Alaska
- Idaho
- Indiana
- Kansas
- Louisiana
- Mississippi
- Missouri
- Montana
- New Mexico
- North Dakota
- Texas
- Utah
- Wyoming
Conveyance tax rates often consist of a flat percentage rate. Colorado levied a 0.01% transfer tax on all real estate sales, while Arkansas and New Hampshire levied a 0.33% and 1.5% rate, respectively in 2024. Conveyance tax can also be a flat fee, such as in the state of Arizona. The state collects a $2 transfer tax regardless of the property’s value.
Properties in New York City and New York State are levied on a progressive or tiered system based on the property’s price. Homes above $1 million are subject to a “mansion tax.”
Important
Depending on the jurisdiction, the seller and buyer may share the burden of the real estate transfer tax.
Types of Real Estate Transfer Taxes
Conveyance tax rates may vary based on the type of property sold or whether a deed or a mortgage exchanges hands. Even if state transfer tax is not charged, it may be required at the county and city level. In some areas, sellers face state, county, and municipal conveyance taxes.
As of 2024, sellers in Chicago paid up to 0.45% conveyance tax to Illinois. An additional $5.25 per $500.00 of the transfer price of the real property is imposed, with the buyer responsible for $3.75 and the seller responsible for $1.50.
Which State Imposes the Highest Conveyance Tax?
As of 2024, Delaware had the highest real estate transfer tax of 4%.
What Is a Mansion Tax?
A mansion tax is a real estate transfer tax imposed for properties sold above a certain sum and typically paid by the home buyer. The term “mansion tax” may apply to any property and is triggered by the purchase price of the property rather than the size.
When Are Conveyance Taxes Paid?
Real estate transfer taxes by state, county, or city are paid before or at the deed’s recording. It is included in the closing costs and paid during closing.
The Bottom Line
A real estate transfer tax or conveyance tax is levied by the government when the ownership or title of real estate changes. The tax varies by state, county, and locality, and there are no federal guidelines for real estate transfer tax.