Understanding Lake Forest’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.
Are you a Lake Forest homeowner with questions about the Lake Forest transfer tax? While not complicated, transfer taxes are an important part of any real estate transaction, and Illinois is, unfortunately, not a state where such taxes are nonexistent.
As such, you’ll want to have a good understanding of how transfer taxes work in Lake Forest — who pays for them, how much they can impact your bottom line, and if you are exempt from paying them for any reason.
Don’t worry. HomeLight’s quick guide will help explain how these taxes work and what you can expect when selling your Lake Forest home.
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Even rockstar agents can’t make your tax liability disappear, but HomeLight data shows that the top 5% of agents across the U.S. help clients sell their home for as much as 10% more than the average real estate agent, helping offset the tax bill.
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 verifies your 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 have 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?
Unlike other states, Illinois does not have a hard and fast rule on who pays for transfer taxes, so transfer tax liability will depend on the municipality. In Lake Forest, buyers are responsible for paying transfer tax fees.
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 look at how it works in Lake Forest.
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
Since Lake Forest is located in Lake County, the county transfer tax rate is $0.25 per $500 of the property’s sales price.
City transfer taxes
In Lake Forest, the city transfer tax rate is $4.00 per $1,000 of the property’s sales price; tax rounded up to the next $5.00 increment. For example, the transfer tax on a property sold at $1,014,000 would be $4,060.
Additionally, if a Lake Forest resident moves between Lake Forest residences within a one-year period, they are eligible for a transfer tax refund of up to $2,000.
Other transfer fees
Beyond transfer taxes, there may be additional fees to consider, such as those from a homeowner’s association or other local neighborhood organizations. 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.
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.
Sellers have the option to treat paid transfer taxes as selling costs, allowing them to subtract these from their home’s closing sale price, according to the IRS. By doing so, they can lessen the capital gains taxes owed on any profit earned.
Transfer tax exemptions for Lake Forest
There are several possible transfer tax exemptions that Lake Forest real estate transactions can fall under. Here are a few examples:
- Deeds transferred in order to secure debt
- Tax deeds
- Deeds of partition
- Transactions under $100
For a complete list, consult the Lake Forest Real Estate Transfer Tax Exemption List.
Estimating Lake Forest transfer taxes
Ready to sell your Lake Forest home? To accurately estimate your net proceeds, consider using HomeLight’s Net Proceeds Calculator. This tool can calculate closing costs such as transfer taxes, agent fees, and any improvements you’ve made to the property, and can give you a solid estimate of your bottom line.
Additionally, you might consider collaborating with a top Lake Forest real estate agent who can offer valuable insights tailored to your needs. HomeLight can connect you with a professional today, giving you the peace of mind needed to sell your home with confidence.
Editor’s note: This post is intended for educational purposes only and does not serve as legal or financial advice. References to Lake Forest area tax services or attorneys should not be viewed as endorsements.
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