How to Pay Real Estate Transfer Tax

Transfer tax is paid on real estate when property changes hands. This is the tax that is required on the purchase price of the property. Most states require transfer tax by law in order to make the transfer of legal title and record change of possession.

Instructions

1. Know that when you must pay real estate transfer tax, the amount of the tax is figured on the purchase price of the property involved. The tax rate can vary from state to state. It is usually figured as a percentage (sometimes 1 percent in some areas) of the total dollar amount of the selling price of the property involved.

2. Be prepared to pay the real estate transfer tax at the closing table in most states. Many states require the seller to pay the transfer tax. The amount of the transfer tax is usually deducted from the seller's profit and reflected in the settlement statement provided at the closing of the property sale. The closing is usually conducted in an attorney's office. The transfer tax will be taken out and paid to the appropriate tax office and is handled by the attorney.

3. Pay real estate transfer tax jointly (by both seller and buyer) in some states. Some areas require the two parties involved in the transaction to split the cost of the transfer tax. In this case, the total cost of the real estate transfer tax is divided down the middle. Each side pays half.

4. Contact a realtor in your area or call your local tax assessor's office to find out how transfer tax is handled where you live. Because the laws can vary quite a bit, some areas may require the buyer to pay the real estate transfer tax.