What are Transfer Taxes? Everything Homebuyers and Sellers Should Know

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 answer the question “what are transfer taxes?” by detailing 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. While most commonly associated with real estate, transfer taxes can also apply to other assets like stocks, bonds, or vehicles in certain jurisdictions.

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.

In some jurisdictions, real estate transfer taxes are classified as excise taxes, meaning they are imposed on the privilege of selling or transferring property. This classification can affect how the tax is administered and whether it qualifies for exemptions.

When do they 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 they 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.

Generation-skpping transfer tax

One important example when asking what are transfer taxes is the Generation-Skipping Transfer Tax (GST). This federal tax applies when property or assets are transferred to a beneficiary who is two or more generations younger than the donor, such as a grandchild. The GST tax prevents individuals from avoiding estate taxes by bypassing their children in inheritance plans. As of 2025, the federal GST exemption is $13.99 million, the same as the estate tax, meaning this tax generally impacts only high-net-worth estates.

First enacted in 1976 and later revised by the Tax Reform Act of 1986, the GST tax was designed to close loopholes that allowed wealth to skip generations without incurring estate tax. The Tax Cuts and Jobs Act of 2017 temporarily increased the exemption amount, but this is scheduled to sunset in 2026, when the threshold will drop to around $6 million, indexed for inflation. This looming change could significantly impact long-term estate planning strategies.

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.

These high federal exclusion amounts mean that most Americans will not owe federal estate or GST taxes. However, 12 states and the District of Columbia impose their own estate taxes, and 6 states impose inheritance taxes, often with much lower exemption thresholds. For example:

• Estate Taxes: Imposed by states like Oregon, Massachusetts, New York, and Minnesota, with exemption thresholds as low as $1 million.

• Inheritance Taxes: Charged to beneficiaries in Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Maryland uniquely levies both estate and inheritance taxes.

These state-level taxes vary widely in rates and exemptions, so it’s essential to review local laws when planning an inheritance or estate transfer. In many cases, these taxes apply even if the federal estate tax does not.

Historically, the federal estate tax exemption has risen sharply — from $5.49 million in 2017 to $13.99 million in 2025 — due to legislation like the Tax Cuts and Jobs Act. However, unless Congress takes further action, the exemption is scheduled to revert to around $6 million (adjusted for inflation) in 2026. This pending change may impact estate planning strategies in the coming years.

How transfer taxes differ from estate, gift, and property taxes

While they all involve the movement or ownership of property, these taxes serve different legal and financial purposes:

• Transfer taxes: One-time fees paid when ownership changes (e.g., at real estate closings).
• Estate taxes: Charged on the total value of a person’s estate after death.
• Gift taxes: Imposed on lifetime transfers of money or property above the annual exclusion.
• Property taxes: Ongoing, annual taxes based on the assessed value of your home or land.

How they 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.

Beyond real estate

While transfer taxes are most commonly associated with real estate transactions, they can also apply to the transfer of other types of assets. Broadly defined, a transfer tax is a legal transaction fee imposed by a government when ownership of property changes hands. This includes both tangible and intangible assets.

In addition to homes and land, transfer taxes may be levied on:

• Securities, such as stocks or bonds
• Business interests, like shares in a privately held company
• Investment property, including intellectual property or other valuable holdings
  

These taxes are typically imposed to formally record ownership changes and generate revenue from high-value transactions. However, their rules and rates vary widely depending on the asset type and jurisdiction. Understanding the broader legal scope of transfer taxes can be helpful for investors, business owners, or anyone transferring significant assets.

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.

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