Understanding Riverside County’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.
Selling your Riverside County home? You might want to know more about your closing costs, including transfer taxes. These are fees levied by local governments and municipalities when a property changes ownership, and can be an unexpected expense for homebuyers and sellers.
Don’t worry. This guide on Riverside County transfer taxes will explain how they work: who pays for them, how much they are, and any possible exemptions you might qualify for.
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What are transfer taxes?
The Federal Trade Commission defines transfer taxes as a “
When you pass the title of your home — your legal right to own the property — to someone else, the government charges a tax on this exchange.
Where your property is located will determine what you’ll owe in transfer taxes according to local state, county, or city guidelines. Like other taxes, transfer taxes are designed to generate revenue. They will vary in complexity based on the city, state, or county where the transaction takes place.
Who pays for transfer taxes?
Transfer tax liability depends on the municipality in which the transaction occurs. It can fall to the buyer or the seller in California, sometimes both.
In Riverside County, transfer tax liability falls to the seller.
What are the types of transfer taxes?
Transfer taxes are generally divided into three categories: state, city, or county transfer taxes. These are sometimes called “documentary stamp taxes” or “recordation fees”, but they are all essentially the same thing. Here’s a brief look at how it works in Riverside County.
State transfer taxes
State transfer taxes are the only one-size-fits-all tax for home sales in California. Everything is location-dependent.
The Golden State levies a California transfer tax of $0.55 per every $500 of the home’s value. For example, a seller in Tahoe who sells their property for the median home price of $695,000 will pay the same tax rate as a seller in Orange who sells their home for the local median home price of $1,070,000.
County transfer taxes
Riverside County transfer taxes are levied at a rate of $1.10 per $1,000 of the property’s value (or $0.55 per $500), essentially the same rate as the statewide tax. This is in addition to the state’s transfer tax rate.
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 reduce the capital gains taxes owed on any profit earned.
Transfer tax exemptions for Riverside County
Not every real estate transaction in Riverside County is subject to transfer taxes. Here are a few instances when a seller might be exempt from these taxes.
- Transfer to secure a debt: Property transferred solely to secure a loan or obligation.
- Transfer to a government entity: When the buyer is a federal, state, or local government agency.
- Transfer in connection with foreclosure: When a lender receives the property from the borrower due to foreclosure or in lieu of foreclosure (only the amount beyond the unpaid debt may be taxed).
- Transfer due to divorce or legal separation: When property is divided as part of a divorce or legal judgment, and is properly documented.
- Transfer by gift or inheritance: When the property is given as a gift or transferred due to a death.
This is not a comprehensive list. For a full list, consult the Riverside County Documentary Transfer Tax form on the Assessor’s website.
Estimating transfer taxes for Riverside County
If you are ready to sell your Riverside County home, you might want to consider using HomeLight’s Net Proceeds calculator. This will help you estimate your closing costs, including transfer taxes.
Additionally, you might want to consider working with a trained real estate professional. HomeLight can connect you with a top Riverside County real estate agent today. They can help you sell your home with confidence, at a price that you are sure to love, on a timeline that works for you.
Editor’s note: This post is for educational purposes only and does not constitute legal or financial advice. Links and mentions of Riverside County area tax services or attorneys should not be considered endorsements.
Header Image Source: (Oleg Yudin / Unsplash)
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