Understanding Colorado’s Transfer Tax: A Quick Guide
Selling your home in Colorado? You might be asking yourself a lot of questions about your bottom line and how it works, one of which is likely “Is there a Colorado transfer tax?”
What is a real estate transfer tax? A real estate transfer tax is levied on a transaction that transfers property ownership from one person or entity to another.
Our comprehensive guide will dig into the specifics of transfer taxes in Colorado, showing yiou what sellers should expect to pay when they decide to move on from their property.
From state to city levels, we will cover the types of transfer taxes imposed, who is responsible for these fees, and any possible exemptions. Whether you’re selling a mountain retreat in Aspen or a suburban home in Denver, knowing these details can significantly impact your closing process.
What are transfer taxes?
Real estate transfer taxes are a type of levy imposed by state or local governments when ownership of property is transferred from one party to another.
According to the Federal Trade Commission, a transfer tax is applicable whenever the title of a property—essentially the legal documentation that confirms ownership—is passed to a new owner. The specific amount owed in transfer taxes can vary significantly depending on the property’s location, as each state, county, and even city may have its own regulations and rates.
These taxes are primarily a way for governments to generate revenue, supporting various public services and infrastructure projects.
Colorado is an exception, as the state doesn’t actually levy a “transfer tax” due to an amendment passed by the state over 30 years ago, putting a stop on the creation of any new taxes levied at the state level, while also prohibiting any current real estate transfer taxes from being imposed.
Instead, lawmakers created a “documentary fee” as a workaround, though it functionally serves the same purpose as a transfer tax.
Who pays for transfer taxes?
Unlike other states, in Colorado, the buyer is typically responsible for documentary fee, or transfer tax. However, the buyer and seller have the option to come up with an agreement to determine who pays what.
