What is a Conveyance Tax?

A conveyance tax is a tax assessed when the title to a piece of real estate is transferred from one party to another. Also sometimes referred to as a transfer tax, a conveyance tax may be imposed on either an individual or an entity. The tax is usually paid at the time the property is conveyed to the buyer.

While it is often customary for the seller of the property to pay any conveyance taxes, a buyer may agree to foot the bill in some cases. Alternatively, during purchase contract negotiations, some sellers and buyers may agree to split any conveyance assessments. Although less common, real estate agents may also offer to cover a portion of the conveyance taxes as an incentive for a buyer to purchase the property. The purchase contract typically documents which party is responsible for paying any conveyance assessments.

Different types of conveyance taxes may be imposed on a real estate transfer. Generally, this varies based on the tax laws in the country, state, or city in which the property is located. Some countries impose a national conveyance assessment. In other countries, more than one type of conveyance tax may be levied.

For example, state and municipal conveyance taxes may be charged when a property transfer occurs. These state or municipal conveyance taxes are imposed by the state or municipality in which the property is located. While national, state, and municipal conveyance tax rates vary, most are equivalent to a set percentage of the sales price. The percentage is usually dictated by statute, and can vary depending on the type of property sold and the selling price.

Some laws exempt specific types of real estate transactions from conveyance taxes. Common conveyance tax exemptions include property transfers between spouses, property sales to non-profit organizations, or certain property acquisitions made in relation to employee relocation plans. Depending on how long a property has been owned, a conveyance assessment may not be charged at all. For example, some statutes mandate waving conveyance taxes if the owner of a residential property has held the property for six months or less.

Certain kinds of properties may be assessed higher conveyance tax rates. This may increase the closing costs paid by the buyer or seller. For example, some laws impose an additional tax if a buyer purchases a condominium as an investment property rather than as his or her primary residence. Before closing on a property, buyers and sellers should work with their attorneys and real estate professionals to evaluate whether these higher taxes may apply to their transactions.