Conveyance Tax

DEFINITION of 'Conveyance Tax'

Conveyance tax is a tax imposed on the transfer of real property, at the state, county or municipal level. Also called real estate transfer tax, conveyance tax is generally calculated as a percentage of the sale price. If the property is sold for a very low amount or is transferred for free, such as between family members, it may be exempt from conveyance tax but still subject to estate tax, in some cases.

BREAKING DOWN 'Conveyance Tax'

In some jurisdictions, the conveyance tax increases as the property's sale price increases; in others, it is a flat rate. The conveyance tax rate may also depend on the type of property, such as residential, nonresidential or unimproved land. While state and municipal conveyance taxes are common, there are no applicable federal conveyance taxes.

Conveyance tax rates often consist of a flat percentage rate. For example, Colorado levies a 0.01% transfer tax on all real estate sales, while Arkansas and New Hampshire levy a 0.33% and 1.5% rate, respectively. Although it is rare, conveyance tax can also be a flat fee, such as in the state of Arizona. The state collects a $2 transfer tax regardless of the property's value.

Conveyance Taxes Vary Based on Property Values

In other cases, state conveyance tax rates vary based on the value of the property transferred. For example, the tax rate for residential real estate in Connecticut is 0.75% on transfers worth less than $800,000, but it increases to 1.25% for amounts that exceed that threshold. To illustrate, if someone sells his Connecticut home for $1 million, he must pay the state $6,000 on the first $800,000 and $2,500 on the remaining $200,000. On top of that, he must also pay a municipal conveyance tax.

Multiple Real Estate Transfer Taxes

In some areas, sellers face state, county and municipal conveyance taxes. In particular, as of 2016, sellers in Chicago must pay 0.1% conveyance tax to Illinois, 0.05% to the county, and 1.05% to the city of Chicago. In other cases, conveyance tax rates vary based on the type of property sold, as well as other factors. New Jersey, for example, offers reduced tax rates to seniors and the disabled. States such as Oklahoma and Alabama charge different transfer taxes based on whether a deed or a mortgage exchanges hands.

Paying Conveyance Taxes

Traditionally, sellers pay conveyance tax, but the rules vary from area to area. In New York, the seller pays the real estate transfer tax, but if he is exempt, the obligation passes to the buyer. If the property is worth $1 million or more, as of 2016, the buyer incurs an additional 1% conveyance tax, but if he cannot meet that obligation, it passes to the seller. In New Hampshire, the buyer and the seller must each pay the conveyance tax.

  1. Property Tax

    A tax assessed on real estate by the local government. The tax ...
  2. Uniform Transfer Tax

    A combination of federal estate taxes and federal gift taxes. ...
  3. Tax Base

    The assessed value of a set of assets, investments or income ...
  4. Taxes

    An involuntary fee levied on corporations or individuals that ...
  5. Settlement Agent

    1. The party involved in completing a transaction between a buyer ...
  6. Property Tax Deduction

    State and local property taxes that are generally deductible ...
Related Articles
  1. Personal Finance

    The 7 Best States For Property Taxes, and Why

    Understand why some states have high property taxes while others have low property taxes. Learn about the states with the lowest property taxes.
  2. Personal Finance

    10 States With High Sales Taxes

    Most states have sales taxes of some kind for goods and services. Here's a rundown of the states that have the highest sales taxes.
  3. Personal Finance

    Use Tax Vs. Internet Sales Tax: How Are They Different?

    Learn about the differences between a use tax and an Internet sales tax. Find out about transactions in which the taxes apply, and to whom they apply.
  4. Personal Finance

    Your Property Tax Assessment: What Does It Mean?

    Understanding your property taxes can protect you from financial shocks.
  5. Personal Finance

    How Much Tax Do You Really Pay?

    When you add direct and indirect taxes together, your real tax rate is much more than you expected.
  6. Personal Finance

    9 States Where You'll Pay the Most in Taxes

    Which state you live in can mean thousands of dollars saved or lost in taxes each year. Here's a list of states to avoid when it comes to tax rates.
  7. Personal Finance

    Your Property Tax Assessment: What Does It Mean?

    The amount of a property tax bill is based on the property’s value, the exemptions it qualifies for, its use and the local property tax rate.
  8. Personal Finance

    Estate Taxes: Who's on the Hook?

    Inheritance taxes can be tricky. Most people have to deal with them at a very inconvenient time. It's better to learn the laws now so you're ready later.
  9. Personal Finance

    Taxes: Who Pays And How Much?

    When it comes to taxes, the debate is endless on who pays what, especially in Congress. With no new initiatives in sight, let's take a look at who is paying now.
  10. Personal Finance

    Your Property Tax Assessment: What Does It Mean?

    Property taxes are a primary source of revenue for governments, and they’re a big expense for homeowners. They can vary widely depending on where you live.
  1. What is the difference between income tax and capital gains tax?

  2. What would the estate tax be on life insurance policy of $25,000?

    $25,000 was paid to the beneficiary of a life insurance policy. What would the estate tax be and do you have to pay an estate ... Read Answer >>
  3. In which US cities do high-income earners pay the most tax?

    See which U.S. cities punish high net worth individuals the most through the highest levels of income taxes, property taxes ... Read Answer >>
  4. What is the difference between a state income tax and a federal income tax?

    Learn the difference between state income tax and federal income tax based on tax rates, deductions, tax credits and taxable ... Read Answer >>
  5. How are real estate taxes calculated?

    Find out how real estate taxes are calculated; failure to pay these taxes that can be a substantial annual expense can lead ... Read Answer >>
  6. What's the difference between the marginal tax rate system and a flat tax?

    Find out about the difference between marginal tax rates and flat taxes. Gain insights on both systems and the arguments ... Read Answer >>
Trading Center