Quitclaim Deeds & Excise Tax: Avoiding Transfer Taxes in Washington

Quitclaim deeds are generally used to transfer property ownership between spouses or family members. They are not typically used when there is an actual sale. Many states impose a tax on property transfers at the time the deed is submitted for recording. Washington state calls this tax the excise tax. There are certain exemptions that allow a quitclaim deed to transfer property with no tax due.

Function

Quitclaim deeds convey property ownership from one party to another. The language in the deed does not offer a guarantee that the grantor holds a clear title to the property, nor that he actually owns it at all. This is why they are most often used for simple transfers, adding or removing a name to the title. Conversely, a warranty deed does offer a guarantee of a clear title and holds the grantor accountable to remedy any issues that may arise after the transfer.

Excise Tax

Deed transfers for property in Washington are subject to the state and local real estate excise tax. The tax is calculated as a percentage of the consideration paid for the property, which is recited on the deed. As of October 2011, the state tax rate is 1.28 percent. Local towns and cities also assess the excise tax, separate from the state. The rates vary by location. Some places do not charge for the tax, while others charge as much as 1.5 percent. The tax is paid to the county treasurer for both state and local fees. Taxes must be paid before a deed can be recorded.

Exemptions

While the excise tax applies to all deed transfers, there are exemptions offered by Washington. Many times, a quitclaim deed meets the requirements for an exemption because they are generally not used for the sale of a property. Exemptions include gifts, when no consideration is listed or paid for the property. Transfers in regards to divorce proceedings are also exempt. Transfers to create or dissolve joint tenancy are exempt. A number of other transfers are exempt but deal mainly with specific occurrences such as bankruptcy and foreclosure.

Forms

Each deed submitted to be recorded in Washington must be accompanied by a completed real estate excise tax affidavit (see Resources). This form discloses information about the grantor, grantee and property. Additionally, there is an area on the form to calculate the amount of tax owed on the transfer. In order to successfully claim an exemption the form must include the proper exemption code, known as a WAC Code. The codes and the form are available on the Washington Department of Revenue website.