Understanding Aurora’s Transfer Tax: A Quick Guide
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Joseph Gordon EditorJoseph Gordon is an Editor with HomeLight. He has several years of experience reporting on the commercial real estate and insurance industries.
If you are selling a home in Aurora, you may be curious about transfer taxes. Real estate transfer taxes are fees levied by local governments when a real property, such as a home, changes ownership.
Aurora property owners have to be aware of the Aurora transfer tax, and this guide will serve as a helpful tool to help demystify how this tax works and what you can expect to pay when selling your home.
Additionally, we will explain possible transfer tax exemptions you might qualify for and how paying your Aurora transfer tax can impact your capital gains earnings.
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What are transfer taxes?
Real estate transfer taxes are charged by state or local governments when property ownership is transferred from one individual to another. According to the Federal Trade Commission, these taxes are due when the title to a property, essentially the document that confirms your legal ownership, is officially passed to a new owner. This can occur through sales, inheritance, or gifting of property.
The amount owed in transfer taxes can vary widely based on the property’s location.
Different states, counties, and cities can establish their own rates and regulations for these taxes. Transfer taxes primarily serve as a means for local and state governments to generate revenue, funding various public services and infrastructure projects.
Who pays for transfer taxes?
Now that you know what a real estate transfer tax is, you might be curious about who is on the hook for it. The buyer, the seller, or somewhere in between?
Like most things related to real estate, it depends! Different cities, states, and municipalities have their own rules governing the liability of transfer taxes, and Aurora is no different.
Typically, the Aurora transfer tax is the responsibility of the seller (or grantor). However, this can be negotiated in the terms of the sales contract. It’s also important to note that it is illegal for the buyer (or grantee) to accept the property transfer if the transfer tax has not been paid.
What are the types of transfer taxes?
Transfer taxes typically vary according to local regulations but can generally be categorized into three types — state, city, and county, depending on the state. Here’s a brief overview of how it works in Aurora.
State transfer taxes
For property transfers in Illinois, a documentary transfer tax of $0.50 per $500.00 of home value is applied. However, additional taxes may apply based on your specific location in Illinois.
County transfer taxes
In Aurora, the county transfer tax rate is $0.50 per $1,000.
City transfer taxes
The Aurora transfer tax is $3.00 per $1,000 of the transaction’s value.
Are transfer taxes deductible?
Transfer taxes are, unfortunately, not eligible for tax deduction.
However, you might be able to lower the amount you pay in capital gains taxes.
Capital gains, defined as the profit obtained from the sale of your home or the financial gain from selling your property, are subject to federal taxation just like profits from the sale of other assets.
According to the IRS, sellers have the option to treat paid transfer taxes as selling costs, allowing them to subtract these from their home’s closing sale price. By doing so, they can diminish the capital gains taxes owed on any profit earned
Transfer tax exemptions
Some Aurora sellers might find themselves eligible for exemptions from transfer taxes.
These exemptions can significantly impact the overall cost of transferring property ownership. Here are a few examples:
- Property transfers involving governmental bodies or specific non-profit organizations.
- Transactions securing debt or other obligations.
- Amendments to previously recorded deeds without additional consideration.
- Sales priced under $500.
- Transactions where the deed is a tax deed.
- Releases of property that secure debt.
- Deeds of partition.
- Transactions between parent companies and their subsidiaries or between subsidiaries of the same parent company due to business restructuring.
- Transfers from a subsidiary to its parent in exchange for stock cancellation or surrender.
- Properties involved in a bankruptcy plan confirmation.
- Properties in enterprise zones are used for commercial or industrial purposes.
- Transfers to lenders resulting from mortgage foreclosures or in lieu of foreclosure.
- Properties under the H.O.M.E. Program.
- Transfers between legally recognized partners following court orders from separation or divorce proceedings.
Other transfer fees
Beyond transfer taxes, there may be additional fees to consider, such as those from a homeowner’s association or local neighborhood organization. Since these can vary widely based on location, consulting a professional is advisable.
If you’re selling your home without a realtor, seeking professional advice might clarify some of the nuances of the process and provide a better understanding of what to expect regarding the pros and cons of selling a house without a realtor.
Estimating transfer taxes for your home sale
If you want to get an idea of what you might earn from selling your Aurora home, consider using HomeLight’s Net Proceeds Calculator. This tool factors in closing expenses, transfer taxes, agent fees, and other costs, along with any updates you’ve made to the property, giving you a solid estimate of what you might earn from the sale.
Additionally, you might want to consider working with a top real estate agent. An expert can offer valuable insights into the selling process, giving you the tools you need to sell your home with confidence. HomeLight can connect you with an Aurora expert and get you started on your home-selling journey.
Editor’s note: This post is for educational purposes only and does not constitute legal or financial advice. Links and mentions of Aurora area tax services or attorneys should not be considered endorsements.
Header Image Source: (Roger Starnes Sr / Unsplash)
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