property

transfer tax

A transfer tax is a tax imposed by a state, county, or city when title to real property is transferred, usually calculated as a percentage or a set amount per $500 or $1,000 of the sale price. Who pays it, the rate, and any exemptions vary by state and locality. It is often collected when the deed is recorded and is sometimes called a documentary stamp tax.

Exam tip: Exams use transfer tax for math: divide the price by the stated unit and multiply by the rate. Read carefully whether the rate is per $500 or per $1,000.
Example: A home sells for $300,000 where the tax is $2 per $500. The transfer tax is $300,000 ÷ $500 = 600 × $2 = $1,200.

1. A home sells for $389,000. The seller pays a 5% commission, a $212,600 mortgage payoff, $1,200 attorney fee, $1,950 transfer tax and $600 in other costs. What are the seller's net proceeds?

Answer & explanation

Answer: D. Commission = $389,000 x 0.05 = $19,450. Total costs = $19,450 + $212,600 + $1,200 + $1,950 + $600 = $235,800. Net = $389,000 - $235,800 = $153,200.

Related terms & state variants

closing statement debit recording recording fee

Sources

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Last verified: 2026-10-23