OfflineIn many states, the transfer of real estate from one party to another triggers a taxable event for payment of local Real Estate Transfer Taxes. But some transfers are exempt from transfer taxes. This list may not include every possible exempt circumstance, but will cover the most common circumstances. Real Estate Transfer Taxes can range from a few hundred dollars, to up to 4% of the transfer price on some investment properties, depending on the state in which the property is located.
1. Transfers between direct family members through marriage or blood: spouses, parents and children or the spouse of a child, siblings or spouse of a sibling, grandparent and grandchild or spouse of grandchild, sisters or brothers-in-law so long as they are not remarried;
2. Gift or transfer for no consideration under direction of a will or intestate succession where no will is involved;
3. Transfer for no consideration to a Trustee (of a living trust or land trust) where the transfer would be otherwise exempt; i.e., where all beneficiaries of the trust are exempt family members
4. Transfer for no consideration to a Trustee (of a living trust or land trust) from the creator/grantor of that trust
5. Transfers made by corporations as a result of a merger or consolidation
6. Transfers from a corporation to its shareholders or from a limited liability company to its members, so long as they have been shareholders or members of that entity for two years or more
Note: An actual sale of a property generally triggers a taxable event for transfer taxes. It is recommended that you not take actions that conceal a transfer that is subject to real estate transfer tax. Please consult with your tax accountant in regard to tax liability from a proposed transaction.
Dallin Wall
Real Estate Training Team
Forum Blog Location--A collection of my
"Best of" posts:
http://www.deangraziosi.com/blogs/dwall
While we are on the topic of exemption from taxes, let's talk about the biggest real estate tax exemption that the government has given to us. It's the Personal Residence Tax Exemption, and it applies only to your primary home. If you purchased a home, and have lived in that home and used it as your personal residence for two out of the preceding five years, if you make a profit when you sell that home, you may exempt from taxation up to $250k in profit from the sale ($500k if you file a joint tax return). The property must meet both the ownership and usage requirements mentioned above.
It strikes me that if more people understood this, there would be more properties purchased by people as fixer-uppers to be used as a personal residence. And alas, you cannot be reimbursed if you take a loss on the sale of your residence even if you meet the ownership and usage requirements. And there are some restrictions on business use of your home or using it for rental--it still must meet the two requirements mentioned above.
With property values going up, the likelihood of being able to capitalize on this exemption due to appreciation potentially combined with property improvement grows greater, and may be attractive to many investors in the program.
Dallin Wall
Real Estate Training Team
Forum Blog Location--A collection of my
"Best of" posts:
http://www.deangraziosi.com/blogs/dwall