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If you’re looking to buy or sell property, you’ll know there are several fees associated with a real estate transaction. You may find yourself looking for all the different details that affect how much money you get or pay.
Transfer taxes or conveyance taxes are just another one of these many things to watch out for. While it may seem insignificant when compared to the value of a real estate transaction, understanding how transfer taxes work could help you while buying or selling a home.
Transfer Taxes in Florida
Transfer tax is a fee levied by governments when property ownership or title is transferred between entities. Most states charge some form of a transfer tax, but both the government’s usage and the amount varies by county. Florida is no exception as, during each transaction, Florida governments charge a fee for documentary stamps (doc stamps).
A documentary stamp tax is a tax levied on documents when transferring an obligation, right, or property and is equivalent to a real estate transfer tax. The seller is responsible for the doc stamps during a real estate transaction, so they will typically be the ones to pay the fee. However, real estate transactions are always negotiable, so the buyer can pay this fee if outlined in the purchase agreement.
Avoiding Transfer Taxes
Transfer taxes are a very controversial topic in Florida. Since transfer taxes are charged as a percentage of home prices, the government receives much more revenue on sales of high-value properties. However, before the Corporate Transparency Act passed in 2021, many high-net-worth entities would use Limited Liability Corporations (LLCs) to avoid paying real estate fees on transactions.
This loophole was only used by the wealthiest individuals in Florida, but people would shovel real estate under shell corporations and avoid fees by buying shares of the company. Some experts say that there are still loopholes in the system for avoiding transfer taxes, but only time will tell.
However, as an individual home buyer, you can still avoid paying transfer taxes without exploiting the law. If you are transferring property to a spouse, then you can avoid documents of transfer and consequently, the transfer tax. Under this transaction, there is no transfer tax charged throughout the transaction.
You may also be exempt from paying the transfer tax in the case of bankruptcy. These are quite obscure situations that likely won’t arise for a regular home buyer. Unfortunately, most individuals and families don’t have a way of avoiding this government fee.
How Much Are Transfer Taxes?
Now that you have a solid understanding of how transfer taxes work, the question of how much it will cost you arises. Unlike other states with different transfer taxes per county or different transfer taxes by home price, the transfer tax in Florida is quite straightforward. In every county not including Miami-Dade, the transfer tax is 0.7% of the home sale price.
Within Miami-Dade County, the transfer tax is 0.6% of the home sale price. This means that the transfer tax on a $300,000 home would cost you $2,100 or $1,800 in Miami-Dade County. This is on the higher end compared to other US states since most states have very low transfer taxes of less than 0.3% and some don’t have a transfer tax at all. Unfortunately, this means that transferring property in Florida may cost you a bit more per transaction.
While the party responsible for paying the transfer tax can be negotiated, it is standard for sellers to pay the full amount in Florida. This adds to the many seller closing costs that Florida homeowners have to consider when thinking about long-term investments or moving to a new property.
Other fees can include the real estate agent commission, seller concessions, or home repairs. Florida home sellers should expect to pay about 3% in closing costs in addition to a 6% realtor commission. Transfer taxes are one of the many considerations that home sellers have to make in Florida and just like any other part of a real estate transaction, it’s good to have some basic knowledge on the topic.