Beware Increasing Property Transfer Taxes

Tuesday, May 6th, 2014

Counties and cities in most states require that a transfer tax be paid whenever documents evidencing a real property transfer are filed.  California became one of those states in 1967 with the enactment of the Transfer Tax Act to replace the expired Federal Stamp Act.  Counties and cities responded to the passage of Proposition 13 in 1978 by increasing these transfer taxes.

With increasing budget pressure now, the level of tax has increased in some locales and can be significant.  For example, Alameda County charges a transfer tax of $1.10 per $1000 of property value, while Berkeley, within Alameda County adds an additional $15.00 per $1000 of property value, bringing the total transfer tax due to $16.00 per $1000 of property value. Exemptions do exist, such as, with certain caveats on each:

  • transfers that are inter vivos gifts,
  • transfers outright to trusts for the benefit of any person or entity,
  • transfers by reason of the death of any person,
  • transfers made to effectuate a plan of reorganization,
  • transfers which result merely in a change in the method of holding title where proportional interests remain the same, or
  • transfers incident to foreclosure sales).

How such exemptions are proved also varies by locale.

Because it is not often clear exactly what paperwork must be filed to evidence the transfer tax in order for the document to be accepted for recording and/or for an exemption to be claimed, seek assistance before finalizing any property transfer.