Understanding Minnesota’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.
When selling a home in Minnesota, you’ll have to deal with various fees, including real estate transfer taxes. A real estate transfer tax is a government-imposed fee collected when property ownership changes hands. These taxes are typically calculated as a percentage of the sale price and can vary by state, county, or city.
If you’re preparing to sell your home, knowing the ins and outs of Minnesota’s real estate transfer tax is essential for budgeting and determining your bottom line. Our short guide will break down how these taxes work, who is responsible for paying them, and what additional transfer-related fees you might encounter in Minnesota. We’ll also cover potential exemptions and whether any portion of the tax is deductible.
Connect with a Top Agent to Help Maximize Value
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?
A real estate transfer tax is a state or local tax imposed when property ownership is officially transferred from one person to another. According to the Federal Trade Commission, this tax applies when the title — the legal documentation proving ownership — passes to a new owner. The amount owed typically depends on the location of the property and the applicable state, county, or city regulations.
Transfer taxes vary by jurisdiction and are often calculated as a percentage of the property’s sale price. These taxes help generate revenue for local and state governments, funding public services and infrastructure. Whether you’re selling a home in Minnesota or elsewhere, it’s important to understand how these taxes may affect your closing costs and overall sale proceeds.
Who pays for transfer taxes?
Who pays the Minnesota real estate transfer tax will depend on the state.
In Minnesota, depending on the terms of the sales agreement, the buyer, the seller, or both can be responsible for any transfer taxes.
What are the types of transfer taxes?
Transfer taxes will vary by the state, county, and city where the property is located.
State transfer taxes
For Minnesota, the statewide transfer tax is $1.65 for every $500, or 0.33% of the transaction. For property transfers recorded after 2019, any property valued at less than $3,000 will not be taxed.
County transfer taxes
For properties changing hands in Hennepin and Ramsey counties, a state minimum deed tax amount of $1.70 is applied. There is also an additional Environmental Response Tax of 0.0001.
For example, if your Hennepin County home sold for $200,000, the rate would be calculated as follows:
Location Calculation Amount due
| Hennepin County | (0.0033 x $200,000) + (0.0001 x $200,000) | $680 |
Other transfer fees
In addition to transfer taxes, there are possible fees to consider, such as from a homeowner’s association or another local neighborhood organization. Again, as these can vary heavily based on location, it’s important to consult a professional.
If you’re selling your home for sale by owner, consulting a professional might help with some of the finer points of the process and give you a better idea of what you can expect.
Are transfer taxes deductible?
Real estate transfer taxes are not tax-deductible on your income tax return. However, sellers may be able to reduce their capital gains tax liability when selling a home. Capital gains refer to the profit made from selling your property, and this profit is subject to federal taxation, similar to other asset sales.
The IRS allows sellers to classify transfer taxes as selling costs, which means they can deduct these expenses from the home’s final sale price when calculating their taxable profit. By lowering the amount of reported gains, sellers may decrease the taxes owed on any profit earned from the sale. If you’re unsure how this applies to your situation, consulting a tax professional can help clarify potential savings.
Transfer tax exemptions
Some sellers may qualify for exemptions from Minnesota real estate transfer taxes, depending on the nature of the property transfer. Exemptions vary by jurisdiction, but in Minnesota, certain transactions are not subject to transfer taxes, including:
- Property transfers related to mortgages
- Recording of plats (official property maps)
- Transfers through wills or testamentary distributions
- Leases, which do not involve a change in ownership
- Sheriff’s foreclosure sale certificates, typically issued in foreclosure proceedings
- Transfers resulting from a marriage dissolution decree
Estimating transfer taxes for your home sale
Estimating your transfer taxes ahead of time can help you plan for the financial aspects of selling your Minnesota home. A quick way to gauge what you might earn from your sale is by using HomeLight’s Net Proceeds Calculator. This tool factors in key costs like transfer taxes, agent commissions, and other closing expenses to give you a clearer picture of your expected profit.
For a more precise estimate, working with a top real estate agent can be invaluable. Agents understand local tax requirements and can help you determine whether transfer taxes or other closing costs might be negotiable.
While these fees are often assigned to either the buyer or seller, their responsibility can sometimes shift based on market conditions and the specifics of your sale. Discussing transfer taxes with your agent early on can help you avoid surprises at closing.
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