Understanding Transfer Tax: A Step-by-Step Calculation Guide

Some states have what is called transfer tax or grantor's tax on conveyance of real estate. In some states, they are stamps that are purchased and affixed on the deed. In other states, the tax is paid directly to the county recorder or court clerk. The tax might be paid by the buyer, seller or divided between the two. The following steps provide information about how the transfer tax is calculated.

Step 1

Identify the amount of the state's transfer tax. For our example, let's say it is $2 for each $500, or a fraction of that amount.

Step 2

Identify the sale price of the house. For our example, the sale price will be $200,000.

Step 3

Calculate the taxable units. To do that, you will divide the sale price of $200,000 by $500, making the taxable units equally 400.

Step 4

Multiply the taxable units by the transfer tax. In our example, it would be 2 x 400, making the transfer tax $800.