Understanding Boston’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 a homeowner in Boston who is considering selling your property, you may have wondered about transfer taxes. While there is currently no specific Boston transfer tax, Massachusetts homeowners are still subject to this fee, and you might have questions about what it is, who pays for it, and how it can affect your bottom line.
Don’t worry. Our short guide will help demystify the transfer taxes in Beantown, answering questions about possible exemptions, capital gains implications, and more.
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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 of a property, essentially the document confirming legal ownership, is officially transferred to a new owner. This can occur through sales, inheritance, or gifting of property.
The amount owed in transfer taxes can vary significantly based on the property’s location, as different states, counties, and cities establish their own rates and regulations. Transfer taxes primarily serve as a revenue source for local and state governments, funding various public services and infrastructure projects.
Who pays for transfer taxes?
The seller of a property (also known as the “grantor”) is responsible for paying transfer taxes in Boston. However, this can vary depending on the terms of the sales agreement.
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 Boston.
State transfer taxes
Statewide, the transfer tax, known in The Bay State as a deeds excise tax, is levied at a rate of $2.28 for each $500 of the total consideration of the transaction. No excise tax is due if the property changes hands for less than $100.
While there is no Boston-specific transfer tax, lawmakers have proposed transfer tax legislation for Beantown in recent years, despite not gaining much ground.
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 can help clarify the process and provide a better understanding of what to expect regarding the pros and cons of selling a house without a realtor.
Are transfer taxes deductible?
Unfortunately, transfer taxes are not eligible for tax deduction.
However, you can 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 Massachusetts homeowners might be eligible for exemptions on transfer taxes, but it can depend on the specifics of the transaction.
Here are several scenarios where transfer tax exemptions may apply:
- Mortgage deeds
- Deeds that correct, modify, or supplement previously recorded deeds
- Deeds transferred between husband and wife, or parent and child, when no monetary consideration is exchanged
- Tax deeds
- Deeds releasing property that serves as security for a debt
- Deeds for the division of property between owners without any monetary consideration
- Foreclosures of mortgages by the foreclosing parties
Estimating transfer taxes for your Boston home sale
Ready to sell your Boston home?
To get a good idea of what you might walk away with, consider using HomeLight’s Net Proceeds Calculator. This tool accounts for essential costs such as closing expenses, transfer taxes, agent fees, and any improvements made to the property, giving you a reasonable ballpark estimate of your potential earnings from the sale.
Additionally, collaborating with a top real estate agent can offer valuable insights tailored to your situation. HomeLight can connect you with an expert on the Boston real estate market today, giving you the peace of mind you need to sell your home with confidence.
Editor’s note: This post is for educational purposes only and does not constitute legal or financial advice. Links and mentions of Boston area tax services or attorneys should not be considered endorsements.
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