STATE TRANSFER TAXES & OTHER CHARGES
STATE TRANSFER TAXES
State documentary stamp tax on deeds /
State documentary stamp tax on notes / State intangible tax on mortgages
State documentary stamp tax on deeds
Transfer tax, or documentary stamp tax as it is referred to in Florida, is a tax imposed by states, counties, and cities on the transfer of the title of property from one person or entity to another within the jurisdiction. It is based on a percentage of the property’s sale price, and it is due at closing or by the time the deed is recorded. Some jurisdictions in Florida mandate who is to pay the tax. The common practice is for the seller to pay the tax, but local market conditions influence who pays and allow for negotiations. For example, in a seller’s market, the seller is in a position to negotiate for the buyer to pay; while a buyer’s market puts the onus on the seller to pay.
Regardless of the market, sellers are mandated by law to deliver a recordable deed, which requires that the stamp tax has been paid. Consequently, if the seller is not able to convince the buyer to pay the tax, the seller will be responsible for paying it to be able to deliver the recordable deed. The party responsible for paying the tax would have been negotiated prior to closing, so the tax will show as a debit on that person’s column on the closing statement.
Because the tax is a revenue source for local governments, tax rates are periodically raised when needed for the city or county’s budgetary expenses. Currently, the rate is $0.70 (70 cents) per $100 of the sale price throughout Florida. However, in Miami-Dade County, the rate is $0.60 (60 cents) per $100 of the sale price for single family homes with an additional surtax of $0.45 (45 cents) per $100 for other residential dwellings such as townhouses.
To illustrate, if the sale price of a single-family home in Broward County is $300,000, or 3,000 of the $100 tax units, the procedure is: multiply the total tax units by the $0.70 tax rate. The documentary stamp tax on this sale would be $2,100.
In Miami-Dade County, the same home with the same sale price would still have 3,000 tax units. Multiply those units by the $0.60 Miami-Dade tax rate, and the documentary stamp tax on this single-family home sale would be $1,800.
On another note, if the $300,000 sales had concerned condominiums in each of the two counties, in Broward County (or any other Florida county except Miami-Dade), the tax units, rate, and documentary stamp tax would be the same as for the single-family home: $2,100.
In Miami-Dade County, the tax units, rate, and documentary stamp tax would also be the same as for the single-family home: $1,800. However, the 3,000 tax units would also be multiplied by the additional $0.45 surtax rate to equal $1,350. That amount would then be added to the $1,800 to result in $3,150 due for the stamp tax.
Exemptions. Florida property transfer tax exemptions include the following transfers:
- for no consideration (as a gift)
- between spouses with no consideration and no existing mortgage
- between ex-spouses within 1 year of the divorce
- through a will
- through a partition deed
- by the U.S. government or between government agencies
- by eminent domain
- from a nonprofit organization to a state agency
State documentary stamp tax on notes
Intangible tax is calculated on the amount of loan shown on the promissory note. The promissory note is the document that creates and explains the debt, shows the loan amount, and details how the loan will be repaid. Florida statute imposes a one-time nonrecurring tax of 2 mills ($0.002) on each dollar of a mortgage loan or other lien against the property. It may be easier to figure the tax as $0.20 (20 cents) per $100 or $2 per $1,000 of the total loan amount. The intangible tax is due at the closing of the loan and is shown as a debit to the buyer on the closing statement.
The intangible tax works as follows. These taxes are not based on the location of the property within the state, nor do they differentiate between single-family homes and other residential dwellings. They are determined by the amount of the loan and not the value of the property. So, let’s go back to that $300,000 home sale.
Let’s say the buyer placed an offer for the full $300,000 and paid a cash down payment of $50,000. He then financed the remaining $250,000, which equals 250 of the $1,000 tax units. Multiplying the 250 tax units by the $2 tax rate results in an intangible tax of $500.
State intangible tax on mortgages
In addition to the documentary stamp tax charged on the sale of property, Florida statute also imposes a documentary stamp tax on mortgages and liens against property within the state. The rate of the tax is $0.35 (35 cents) per $100 of the total owed in accordance with the promissory note. The tax is paid by the buyer/borrower and is due at closing.
To illustrate, let’s go back to the home sale for $300,000. Again, location within Florida is irrelevant. Again, let’s say the buyer paid the $50,000 down payment in cash and financed the remainder of the sale price. Divide the financed $250,000 by 100 to determine the 2,500 tax units. Then multiply the 2,500 tax units by the $0.35 tax rate. The tax owed on this note is $875 and will show as a debit for the buyer on the closing statement.
OTHER CHARGES
Document preparation Recording Broker’s commission Title insurance
Document preparation
It is customary for the person who has to sign a document to pay the cost of preparing it. Thus, the seller pays for preparing the deed, and the buyer pays for preparing the mortgage and note. Each item will appear as a debit to the paying party on the closing disclosure, with no corresponding credit to the other party.
Recording
The party who wants a document recorded customarily is the one who pays the fee for recording it. Thus the buyer pays for recording the deed, even though the seller paid for preparing it. Again, the fee will appear as a debit to the paying party on the closing disclosure.
Broker’s commission
The listing or representation agreement establishes who pays commissions, but it is common that the person who employs the broker is the one who pays. The commission is a debit to the paying party on the closing disclosure.
Title insurance
There are fees and charges for title-related items such as providing a title abstract or an opinion of title. There are also costs associated with the purchase of a lender’s title insurance policy and an owner’s title insurance policy. The question of who pays these charges is open to negotiation.
