If you’re buying or selling property, transfer taxes are probably one of those costs that don’t cross your mind until you’re knee-deep in paperwork. But knowing what these taxes are—and who typically pays them—can help you budget smartly and avoid any last-minute surprises. Here’s what Ohio buyers and sellers need to know about transfer taxes and how they could affect your next real estate deal.
What Exactly Are Transfer Taxes?
Put simply, transfer taxes are fees that state or local governments charge whenever property changes hands. Usually, they’re based on the property’s sale price or assessed value. In Ohio, these taxes apply to most residential and commercial real estate transactions and are typically calculated as a rate per $1,000.
How Much Are Transfer Taxes in Ohio?
In Ohio, the basic transfer tax rate is $1 per $1,000 of the property’s sale price. Counties can tack on up to an extra $3 per $1,000, which means your total rate will depend on where the property is located.
For example, if you’re selling a home for $250,000:
- State Tax: $1 per $1,000 equals $250.
- County Tax: Let’s say your county charges $2 per $1,000. That would add $500, making the total transfer tax $750.
Checking the specific rate in your county helps avoid surprises at closing and gives you a clear picture of what to budget.
Who Pays Transfer Taxes in Ohio?
Generally, sellers pay the transfer tax in Ohio. But in some cases, buyers and sellers negotiate who’ll cover this cost. In a competitive market, for example, a buyer might offer to cover the transfer tax to make their offer more attractive. Knowing who’s paying this tax before you get to the closing table can prevent any last-minute hiccups.
Are Transfer Taxes Tax-Deductible?
Good question! For most people, transfer taxes aren’t tax-deductible on your federal return. But, you can add them to your property’s cost basis, which may help reduce capital gains taxes when you eventually sell the property.
For investment properties, though, the rules can be a bit different. If you’re not sure whether you can deduct transfer taxes, a quick chat with a real estate accountant can help clear things up.
Budgeting Tips for Transfer Taxes
- Know Your County’s Rate
- Factor Transfer Taxes into Your Overall Budget
- Consider Professional Help
How to potentially avoid transfer taxes?
One method used in rental properties is to create a new LLC for every single property that you purchase. This allows you to track expenses for this one property more efficiently but what this also does is allows you to sell the LLC instead of selling the property.
Selling a business versus selling a piece of property has different tax implications, including transfer taxes. We can discuss this strategy in more detail if interested.
FAQs About Transfer Taxes in Ohio
Do I have to pay transfer taxes on every property sale?
Yes, transfer taxes are generally required on most property sales in Ohio, whether it’s residential or commercial. Rates can vary by county, so it’s wise to check what applies in your area.
Can buyers and sellers negotiate who pays the transfer tax?
Absolutely. While the seller usually covers this tax, some buyers may offer to take it on to sweeten their offer in a competitive market.
Are transfer taxes different for commercial properties?
In general, Ohio’s base rate is consistent, but counties may have their own rules or fees for commercial properties. It’s always best to confirm specific rates based on property type.
Do transfer taxes affect my capital gains tax?
For residential properties, transfer taxes are added to the property’s cost basis, which could reduce capital gains taxes when you sell. For investment properties, the tax treatment may vary, so getting advice from a tax pro is a good idea.
What if my property is in a county with higher transfer taxes?
Since counties can add their own rate, properties in higher-rate counties will have a higher total transfer tax. Knowing your county’s rate helps you plan for the total cost.
Final Thoughts
Transfer taxes are a part of nearly every real estate transaction in Ohio, but they don’t have to be a surprise. By knowing what these taxes are, how they’re calculated, and who typically pays them, you can go into your next real estate deal with a clearer picture of what to expect. Hogan CPA Financial Services is here to help Ohio buyers and sellers with all aspects of tax planning and real estate transactions, so you can focus on what matters most—finding the perfect home or making a smooth sale. Contact us today and we’ll be happy to answer any questions.