Understanding Evanston’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.
Knowing how transfer taxes work is important when selling your home in Evanston. Transfer taxes are fees levied by local or state governments whenever property ownership changes. The rates can differ significantly based on the area and can have a big impact on the overall cost of your sale.
This guide will explain how the Evanston transfer tax works, breaking down what it is, what it costs, who pays for it, and any possible exemptions you might qualify for.
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What are transfer taxes?
Real estate transfer taxes are fees 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 incurred when the title of a property, essentially the document confirming legal ownership, is officially transferred to a new owner.
The amount owed in transfer taxes can vary significantly based on the property’s location, as different states, counties, and cities often 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?
Transfer tax liability will vary based on the city, state, or county where the transaction occurs. Generally, in Illinois, the seller of a property pays for transfer taxes. This is also true in Evanston.
What are the types of transfer taxes?
Transfer taxes can differ based on local regulations, but are generally categorized into three types: state, city, and county. Here’s a brief look at how this works in Evanston.
State transfer taxes
In Illinois, a documentary transfer tax of $0.50 is charged for every $500.00 of the property’s value. Additional taxes may apply depending on your specific location within Illinois.
City transfer taxes
Evanston’s transfer tax rate is tiered, depending on the amount the property sells for.
- For sales prices up to $1.5 million, the tax rate is $5.00 for every $1,000 value or fraction thereof.
- For sales prices over $1.5 million, up to $5 million, the tax rate is $7.00 for every $1,000 value or fraction thereof.
- For sales prices over $5 million, the tax rate is $9.00 for every $1,000 value or fraction thereof.
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 by location, consulting a professional is advisable.
If you’re selling your home without a realtor, seeking professional advice can clarify the process and help you understand what to expect regarding the pros and cons of selling a house without a realtor.
Are transfer taxes deductible?
Unfortunately, transfer taxes are not directly deductible from your income taxes. However, there is a strategy that can help lessen the financial burden, particularly regarding capital gains. Capital gains refer to the profit made from selling your property, which is taxable under federal law.
According to the IRS, sellers can classify transfer taxes as selling costs. This allows them to deduct these costs from the total sale price at closing. By lowering the reported sale price, you effectively reduce the capital gains realized, which can decrease the capital gains tax owed on the profit from the sale.
Evanston transfer tax exemptions
Some Evanston home sales are exempt from transfer taxes. Here are just a few examples. For a complete list, consult Evanston’s real estate municipal code.
- Government-related transfers: Includes property acquired by or from any governmental body.
- Low-value transactions: Applies when the actual consideration is less than $500 or, in some instances, under $50,000 for qualifying low-income sellers under Section 8 guidelines.
- Corrective or clarifying deeds: Covers deeds that confirm, correct, or supplement previously recorded documents without additional consideration.
- Transfers tied to corporate reorganizations: These include mergers, consolidations, or asset transfers under reorganization plans, as well as transfers between parent and subsidiary corporations without monetary exchange.
- Deeds involving court orders or debt security: This includes tax deeds, releases of property securing a debt (to a creditor), and transfers made under court decrees.
Estimating your Evanston transfer tax liability
If you are ready to sell your Evanston home, you might want to consult HomeLight’s Net Proceeds Calculator. This tool helps you estimate closing costs, like transfer taxes, agent fees, and factors in any property improvements.
Additionally, you might want to consider working with a top Evanston real estate agent who can provide valuable insights tailored to your needs. HomeLight can connect you with a professional today, giving you peace of mind as you sell your Evanston home.
Editor’s note: This post is intended for educational purposes and does not serve as legal or financial advice. References to Evanston area tax services or attorneys should not be viewed as endorsements.
Header Image Source: (Elijah Crouch/ Unsplash)
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