Understanding Skokie’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’re selling your Skokie home, you might have questions about transfer taxes. How do they work? How much are they? Who pays for them? Don’t worry. Transfer taxes aren’t complicated, and HomeLight is here to help.
Transfer taxes are fees levied by local or state authorities when real property (like a home) changes ownership. Transfer tax rates can differ significantly based on location and can have a large financial impact on the overall cost of your transaction and your bottom line.
This guide will explain how transfer taxes work in Skokie, including their cost, who is liable for them, and any possible exemptions. Additionally, we will explain how transfer taxes can affect your capital gains burden and why working with a real estate agent is a great idea.
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?
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 due when the title of 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 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?
Sellers (also referred to as the “grantor”) are required to pay for transfer taxes in Skokie. These are sometimes referred to as a “documentary stamp tax”, and while the seller is liable for them, both the buyer (or “grantee”) and the seller are required to sign off on the city’s real estate transfer tax form.
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. Here’s a brief overview of how this works in Skokie.
State transfer taxes
In Illinois, a documentary transfer tax of $0.50 per $500.00 of home value is applied. However, additional taxes may apply depending on your specific location within Illinois.
County transfer taxes
All counties in Illinois have a transfer tax rate of $0.25 per $500.00 of the property’s sales price.
City transfer taxes
In Skokie, the city transfer tax rate is $3.00 per $1,000 of the property’s sales price.
Other transfer fees
Besides 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 clarify some of the nuances of the process and provide a better understanding of 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 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 can treat paid transfer taxes as selling costs, subtracting them from their home’s closing sale price. This allows them to lessen the capital gains taxes owed on any profit earned.
Transfer tax exemptions
Not all real estate transactions in Skokie are on the hook for transfer taxes. If a property is sold for less than $500 or involves a government body, it can be exempt from transfer taxes.
For a complete list of exemptions, consult the Village of Skokie’s transfer tax website. If a transaction is eligible for exemption, a $10 processing fee is required.
Estimating transfer taxes for your home sale
To better understand what you can earn from selling your Skokie home, 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, providing a clear estimate of your potential earnings from the sale.
Collaborating with a top real estate agent can also offer valuable insights tailored to your needs. HomeLight can connect you with a top Skokie real estate agent today who can give you the peace of mind needed to sell your home quickly and confidently.
Editor’s note: This post is for educational purposes only and does not constitute legal or financial advice. Links and mentions of Skokie area tax services or attorneys should not be considered endorsements.
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