A transfer tax is a tax on the passing of

title A title is one or more words used before or after a person's name, in certain contexts. It may signify either generation, an official position, or a professional or academic qualification. In some languages, titles may be inserted between the f ...

property Property is a system of rights that gives people legal control of valuable things, and also refers to the valuable things themselves. Depending on the nature of the property, an owner of property may have the right to consume, alter, share, r ...

from one person (or entity) to another. In a narrow legal sense, a transfer tax is essentially a transaction fee imposed on the transfer of title to property from one entity to another. This kind of tax is typically imposed where there is a legal requirement for registration of the transfer, such as transfers of

real estate Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more general ...

, shares, or

bond Bond or bonds may refer to: Common meanings * Bond (finance), a type of debt security * Bail bond, a commercial third-party guarantor of surety bonds in the United States * Chemical bond, the attraction of atoms, ions or molecules to form chemica ...

. Examples of such taxes include some forms of

stamp duty Stamp duty is a tax that is levied on single property purchases or documents (including, historically, the majority of legal documents such as cheques, receipts, military commissions, marriage licences and land transactions). A physical revenu ...

real estate transfer tax Real estate transfer tax is a tax that may be imposed by states, counties, or municipalities on the privilege of transferring real property within the jurisdiction. Rates In the USA, total transfer taxes can range between very small (for exampl ...

, and levies for the formal registration of a transfer. In some jurisdictions, transfers of certain forms of property require confirmation by a

notary A notary is a person authorised to perform acts in legal affairs, in particular witnessing signatures on documents. The form that the notarial profession takes varies with local legal systems. A notary, while a legal professional, is disti ...

. While notarial fees may add to the cost of the transaction, they are not a transfer tax in the strict sense of the term.

UK

In England and Northern Ireland, property transfers between living persons or other legal entities incur a

Stamp Duty Land Tax Stamp duty in the United Kingdom is a form of tax charged on legal instruments (written documents), and historically required a physical stamp to be attached to or impressed upon the document in question. The more modern versions of the tax no l ...

. Similar provisions exist in Scotland and Wales. When property is transferred from the estate of a deceased person,

Inheritance tax An inheritance tax is a tax paid by a person who inherits money or property of a person who has died, whereas an estate tax is a levy on the estate (money and property) of a person who has died. International tax law distinguishes between an es ...

is payable on the value of the estate including any property portfolio in that estate, subject to a minimum value threshold.

United States

In some states, transfer tax is considered to be an excise tax. Transfer taxes can be levied at the federal, state and local levels, depending on the type of property being transferred.

Real Estate

Real estate transfer tax can be appointed by the authorities of state, county or commune when a real estate property is being transferred within a certain jurisdiction. Subjected to the tax is usually the act of transfer of legal deeds, certificates and titles to a property that are being shifted between the seller and the buyer. The size of the tax is derived from value of the certain property, its classification and from how the property is going to be used, because the purpose of a property can often greatly affect its future value. Therefore, local and state government are permitted to collect the tax based not only on the size of a property, but also its intended purpose. Classification of properties allows states to put different taxes on different properties in a non-uniform manner. The different classifications are commonly based on either use or ownership. There are two main ways that a state uses to tax in a non-uniform manner and those are by imposing different rates of tax on different types of property, or a uniform rate of tax but giving different types of property a different percentage of value. In some states the buyer may be required to pay the tax if the seller either isn't able to pay themselves or is liberated from it. In the

United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...

, the term transfer tax also refers to

Estate tax An inheritance tax is a tax paid by a person who inherits money or property of a person who has died, whereas an estate tax is a levy on the estate (money and property) of a person who has died. International tax law distinguishes between an es ...

and

Gift tax In economics, a gift tax is the tax on money or property that one living person or corporate entity gives to another. A gift tax is a type of transfer tax that is imposed when someone gives something of value to someone else. The transfer must ...

. Both these taxes levy a charge on the transfer of property from a person (or that person's estate) to another without consideration. In 1900, the

United States Supreme Court The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all U.S. federal court cases, and over state court cases that involve a point o ...

in the case of ''Knowlton v. Moore'', 178 U.S. 41 (1900), confirmed that the estate tax was a tax on the transfer of property as a result of a death and not a tax on the property itself. The taxpayer argued that the estate tax was a direct tax and that, since it had not been apportioned among the states according to population, it was unconstitutional. The Court ruled that the estate tax, as a transfer tax (and not a tax on property by reason of its ownership) was an indirect tax. In the wake of ''Knowlton'' the

Internal Revenue Code The Internal Revenue Code (IRC), formally the Internal Revenue Code of 1986, is the domestic portion of federal statutory tax law in the United States, published in various volumes of the United States Statutes at Large, and separately as Title 26 ...

of the

continues to refer to the Estate tax and the related Gift tax as "Transfer taxes." The real estate tax is not imposed by five of the United States of America and those are Mississippi, Missouri, New Mexico, North Dakota, and Wyoming. In this broader sense, estate tax, gift tax,

capital gains tax A capital gains tax (CGT) is the tax on profits realized on the sale of a non-inventory asset. The most common capital gains are realized from the sale of stocks, Bond (finance), bonds, precious metals, real estate, and property. Not all count ...

sales tax A sales tax is a tax paid to a governing body for the sales of certain goods and services. Usually laws allow the seller to collect funds for the tax from the consumer at the point of purchase. When a tax on goods or services is paid to a govern ...

on goods (not services), and certain

use tax A use tax is a type of tax levied in the United States by numerous state governments. It is essentially the same as a sales tax but is applied not where a product or service was sold but where a merchant bought a product or service and then conve ...

es are all transfer taxes because they involve a tax on the transfer of title. The United States had a tax on sales or transfers of stock from 1914 to 1966. This was instituted in The Revenue Act of 1914 (Act of Oct. 22, 1914 (ch. 331, 38 Stat. 745)), in the amount of 0.02% (2

basis point A basis point (often abbreviated as bp, often pronounced as "bip" or "beep") is one hundredth of 1 percentage point. The related term ''permyriad'' means one hundredth of 1 percent. Changes of interest rates are often stated in basis points. If ...

s, bips). This was doubled to 0.04% (4 bips) in 1932, in the context of the

Great Depression The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...

, then eliminated in 1966.Joseph J. Thorndike, “Speculation and Taxation: Time for a Transaction Tax?,” ''Tax Analysts'', September 26, 2008. http://www.taxhistory.org/thp/readings.nsf/ArtWeb/6062A8E3B6C9C7C585257480005BFEE6 Schedule A of Ch. 331 of 38 Stat. 745. https://www.loc.gov/law/help/statutes-at-large/63rd-congress/session-2/c63s2ch331.pdf

References

{{DEFAULTSORT:Transfer Tax de:Verkehrsteuer nl:Overdrachtsbelasting fi:Varainsiirtovero vi:Thuế chuyển nhượng

UK

United States

Real Estate

See also

References