Transfer tax

A transfer tax is a tax imposed by a state, county, or city on the transfer of real property. It's typically calculated as a percentage of the sale price (or per dollar of price) and paid at closing. Rates vary enormously by jurisdiction (some states have no transfer tax at all, others charge multiple percent in combined state and local taxes) and the customary payer (buyer, seller, or split) also varies by state.

How it works: the tax is paid at closing through the closing professional, often by completing a transfer tax form alongside the deed. The settlement statement shows the line item explicitly. In split-pay states, each side typically covers half on the standard contract, though this is negotiable. The amount can be material, Pennsylvania's typical 2% combined rate produces an $8,000 tax on a $400,000 home, paid out of the transaction.

Why it matters: transfer tax is one of the larger closing costs in states that levy it. The closing-costs estimator at /tools/closing-costs models state-by-state transfer-tax conventions for all 50 states + DC, including who pays in each jurisdiction.

Common gotcha: transfer tax is jurisdictionally complex. Many states have a state-level base tax plus county and city additions on top. New York City layers a state base, a city RPTT, and the mansion tax on $1M+ residential. Maryland counties add 0.5% to 1.5% on top of the state's combined transfer-and-recordation taxes. The "transfer tax rate" quoted for a state often understates the actual all-in rate that applies in the relevant city or county.