Most states in the US require that a transfer tax be paid upon the sale or purchase of a home. Georgia is one of these states. Understanding transfer taxes, who pays them, and how they're applied can help you prepare for the transaction. Here's what you should know.
Transfer taxes are taxes applied to the transfer of property such as real estate or vehicles. When you sell your home, it's transferred from you to the buyer. In this case, a transfer tax is applied. Failing to take transfer taxes into account can mean that your financial estimates regarding how much you'll make from a sale can be significantly lower than what you'll actually receive.
Additionally, these taxes and other associated fees can vary on a state, regional, and local level. Therefore, it's critical for both buyers and sellers to work with an experienced real estate agent to ensure they understand the process thoroughly before selling or purchasing property.
To make sure you're as prepared as possible, here's the basic information you need to know about transfer taxes in Georgia.
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Who Pays Transfer Taxes in Georgia: the Buyer or the Seller?
In Georgia, the seller typically pays the transfer tax.
That being said, you can't assume that just because you're a buyer you're off the hook. While in most cases the seller will pay the transfer tax, it's not law. Everything that has to do with who pays what is taken care of during the negotiation phase.
For this reason, you can't know who's really responsible for the transfer tax until the negotiations are over. There are certain situations in which a seller might ask a buyer to pay the taxes. Be sure to work closely with your real estate agent to ensure negotiations are as fair and beneficial to you as possible.
How Much Are Transfer Taxes in Georgia?
The transfer tax rate in Georgia is $1 per $1,000 of assessed value. To make this rate a bit more practical, let's take a couple of examples based on the median home value in several cities.
Atlanta's median home value is $208,100, which means the transfer tax would be around $208. In Columbus, which has a median home value of $88,200, you'd pay around $88, whereas in Milton, which has a median home value of $508,800, you'd pay around $508.
That being said, there might be other federal and local taxes that you'll have to consider, as well. There are all kinds of transfer taxes at the federal level that are broken down into incredibly specific segments. For instance, there are unique transfer taxes for transfers that happen after a death, gift taxes on transfers made while someone is still living, and even a tax on property that skips a generation.
Because there are so many nuanced laws and regulations, it's important to work closely with a real estate agent who has experience in the local market. They will have a solid grasp on the taxes and fees that apply from the federal all the way down to the county level and can help you plan for any fees you'll have to pay.
Can You Deduct Transfer Taxes?
The short answer is: usually not. However, you can wrap the amount of the transfer tax into the cost basis of your property. The cost basis is basically a sum of everything you paid to acquire the property. While this doesn't do you much good as a buyer, it does help when you sell the property because it adds to the cost basis, which effectively reduces the amount of capital gains tax you'll have to pay in the long run.
Typically, real estate transfer taxes are paid at closing. If your sale is residential in nature, the tax amount will be included on the HUD-1 settlement form associated with the transfer. Buyers also have to consider additional fees and taxes when calculating the potential cost of homeownership, even if they don't have to pay the transfer tax. Sellers also have to consider the potential fees and taxes that they'll be responsible for, as well.
It's easy to see how nuanced these transactions can become. That's why you should consult with a local real estate agent who has experience in your market. Clever Partner Agents work for a fraction of the typical commission rate, which is a cost savings opportunity for both buyers and sellers.
Contact Clever today for a no-obligation consultation with a top-rated Partner Agent in your area.