A real estate stamp tax, more commonly known as a real estate transfer tax, is a fee assessed during the transfer of real estate between two parties. The name "stamp tax" comes from the physical or ink stamp that is impressed upon property deeds when transfer fees have been paid to the city, county or state. It is usually customary for the seller to pay the transfer tax, although some states and counties levy a stamp tax on both buyers and sellers.
Benefits
States and counties that collect real estate stamp taxes frequently use the money raised to improve the community. This revenue stream usually funds a specific project such as emergency services, schools, parks or the preservation of natural resources. Residents sometimes pass a transfer tax measure with the intent of preserving open space in order to prevent developers from changing the character of the town.
Types
Most property is taxed during the transfer process, including single and multiple family housing and commercial real estate. If a right-of-way or an easement is sold, a transfer tax is charged. Stamp taxes also apply to time-share property and transfers with the U.S. government.
Fees
A real estate stamp tax is usually assessed at a set percentage per hundred or thousand dollars of a sale price. In the United States, this fee may be levied by the state, county or the city, but stamp taxes are most commonly paid to the state. Some states do not charge real estate stamp taxes. As of 2010, Alaska, Indiana, Idaho, Louisiana, Mississippi, Missouri, Montana, New Mexico, North Dakota, Oregon, Texas and Utah levy no such fees.
Considerations
Not all real estate stamp taxes are assessed by government authorities. In the past 15 years, the new phenomenon of private real estate transfer taxes was born. Home developers may add a clause into a properties deed dictating that buyers pay a transfer tax to the original developer each time the property is sold. Private transfer fees are controversial, causing some states to ban these fees altogether.
Exceptions
Real estate stamp taxes may not be charged in certain instances. Gifts of property are usually exempt from a transfer tax, in addition to property transfers between spouses as a matter of divorce. Cemetery plots and property transfers to the state or county are usually tax exempt. Some cities provide stamp tax exemptions if the resident lives in the area for a specified number of years.