Understanding Illinois’s Transfer Tax: A Quick Guide
Selling your home in Illinois home can be tricky, but one thing you might have considered is the real estate transfer tax. These taxes are assessed whenever a property changes hands, acting as a charge for transferring the property title from the seller to the buyer. These taxes can affect your bottom line, so it’s important to have a strong understanding of what you might pay in your market.
Our guide will cover how transfer taxes work in Illinois, detailing what sellers can expect to pay when parting with their property and what exemptions might exist.
From state and county taxes to city-specific levies, we’ll cover how the Illinois transfer tax works and how to estimate these costs for your home sale.
What are transfer taxes?
Real estate transfer taxes are levied by state or local governments when the ownership of a property is transferred from one person to another. According to the Federal Trade Commission, this tax is applicable whenever the title of a property—essentially the legal documentation that confirms ownership—is passed to a new owner. The amount of tax owed can vary significantly depending on the property’s location, as each state, county, and city may have different tax rates and regulations.
These taxes serve an important role in local and state economies. Primarily, they help generate revenue that supports various public services and infrastructure projects. For property sellers, understanding the specifics of transfer taxes in their locality is crucial, as these can influence the overall cost of selling a property and the final proceeds from the sale.
Who pays for transfer taxes?
In Illinois, the responsibility for paying transfer taxes can vary widely depending on the specific location and the terms agreed upon in the real estate contract. Typically, the seller bears the burden of these taxes, which are calculated based on the sale price of the property.
However, it’s not uncommon for negotiation between the buyer and seller to lead to a different arrangement, where the buyer might agree to take on this cost. There is no standard in Illinois establishing which party is responsible for the tax, only that it gets paid.
As such, it’s important for both parties involved in the transaction to review their contract carefully and consult with a real estate professional to clearly understand who is responsible for these taxes before finalizing the sale.
