Transfer taxes are one-time fees that can add thousands to a real estate deal, depending on your location. Whether you’re purchasing a brownstone in Brooklyn, NY, or selling a ranch-style home in Tucson, AZ, understanding how transfer taxes work can help you avoid unexpected costs and negotiate smarter.
In this Redfin guide, we’ll break down what transfer taxes are, who pays them, how much they cost, and how they vary by state and situation.
What are transfer taxes in real estate?
A transfer tax is a government-imposed fee on the transfer of property ownership from one person or entity to another. In real estate, it’s typically assessed when a home or parcel of land is sold and legally changes hands.
Transfer taxes are usually charged at the state, county, or municipal level, and are based on the property’s sale price or assessed value. These taxes are also referred to by other names like deed tax, stamp tax, conveyance tax, or real estate transfer tax, depending on the jurisdiction.
When do transfer taxes apply?
Transfer taxes most commonly apply during:
- Residential home sales
- Commercial property transactions
- Gifts of real estate
- Inheritance of property
While many buyers and sellers assume these taxes are built into other fees, transfer taxes are usually charged separately and vary widely depending on where the property is located.
Who pays the transfer tax – buyer or seller?
In most states, the seller is responsible for paying the transfer tax. However, the responsibility can vary by location and may be split or negotiated between buyer and seller.
Here are a few examples::
- California: Sellers usually pay the county transfer tax, while some cities add an additional tax that may be negotiated.
- Pennsylvania: Both buyers and sellers usually split the tax equally.
- Texas or Montana: no real estate transfer tax is charged at all.
It’s important to review your purchase agreement and local regulations to determine who’s on the hook.
How to calculate real estate transfer tax
The cost of a transfer tax depends on your location and the value of the property. Rates are typically expressed as:
- A percentage of the sale price (e.g., 0.5% to 2.0%), or
- A fixed amount per $100 or $500 of value.
In order to calculate how much you will pay in transfer taxes, follow these steps:
- Know the sale price of the property.
- Check your local transfer tax rate.
- Apply the rate. If your state charges 1.25%, multiply the sale price by 0.0125.
- Add any municipal surcharges (some cities add their own rates).
- Check exemptions or discounts, such as those for first-time buyers or family transfers.
Where are transfer taxes not charged?
Fourteen states do not have a statewide transfer tax:
Alaska, Idaho, Indiana, Louisiana, Kansas, Mississippi, Missouri, Montana, New Mexico, North Dakota, Oregon (most counties), Texas, Utah and Wyoming.
These states either prohibit such taxes or have never enacted them. However, they may still charge recording fees or other administrative costs at closing.
Are transfer taxes deductible?
Transfer taxes are not deductible on your federal income tax return. However, they can be added to the cost basis of the property, which may reduce the capital gains tax you owe when you sell. This is particularly helpful for investors or homeowners selling after a long period of ownership.
What are transfer taxes on inheritances and gifts?
While traditional transfer taxes apply at the time of sale, other types of taxes may apply when property changes hands through inheritance or gifting.
Here are the types to be aware of:
- Estate Tax: Paid by the estate of the deceased. Only applies if the estate exceeds the federal exemption. ($13.99 million in 2025)
- Inheritance Tax: Paid by the beneficiary. Only in some states like Maryland, Iowa, and Kentucky.
- Gift Tax: Applies to property or money given during a person’s lifetime. You can give up to $19,000 per recipient in 2025 without triggering this tax.
- Generation-Skipping Transfer (GST) Tax: Applies when property skips a generation (e.g., grandparent to grandchild). Same federal exemption as the estate tax.
These taxes aim to prevent avoidance of estate taxes by passing assets across generations outside of a traditional will.
How transfer taxes impact affordability in 2025
With mortgage rates fluctuating and home prices rising in many U.S. markets, closing costs—including transfer taxes—are taking a bigger bite out of buyer and seller budgets.
According to Redfin data, the median sale price of a U.S. home in Q1 2025 is $432,500. In a state with a 1% transfer tax, this adds $4,325 to the cost of selling—on top of agent commissions and other charges.
Why it pays to understand transfer taxes
Whether you’re buying a home in Chicago or inheriting a property in San Diego, knowing what transfer taxes are can help you better estimate your total transaction costs. These fees vary widely by state, and in high-value markets, they can significantly affect your bottom line.
If you’re unsure how transfer taxes apply to your specific situation, talk to a local real estate agent or real estate attorney before closing.
FAQs about transfer taxes
They’re one-time fees charged by your local government when the deed or title is transferred to a new owner.
No — property taxes are recurring, annual fees. Transfer taxes are charged once at the time of sale.
Some transfers, like those between spouses or to a revocable trust, may be exempt. Check your state’s rules or consult a real estate attorney.
Yes, but they are typically itemized separately and not bundled with your mortgage-related costs.