Document Transfer Tax

Today we are talking about the Doc Transfer Tax with one of my favorite Title Reps in Laguna Beach, Cam Hunter with Cal Title. I’ll be asking her to give us a little more information about the subjects which most often raise questions among buyers and sellers.

Cam, could you explain to my readers what the Documentary Transfer Tax is?
It is a tax imposed by the County and/or City for the transfer of property. When the ownership of a property changes hands, the ownership transfer document (Grant Deed, for example) needs to be recorded in the County Recorder’s office where the property is located. The County Recorder, under the Revenue and Taxation Code, collects a “transfer fee”. This fee is the Documentary Transfer Tax and is part of the revenue that is generated for the individual counties and cities.

Who pays for the Documentary Transfer Tax?
Either the Buyer or the Seller as the payment of the transfer tax can be negotiated. Normally, in Southern California (Orange County) the Seller pays. In Northern California the Buyer pays, and in Central California it can be a combination of both.

How much is the Documentary Transfer Tax?
It depends on the location of the property. The California Revenue and Taxation Code has set the tax for all counties at $1,10 per $1,000 (or $0,55 per $500 or fraction thereof) of the transfer value (sales price less the value of any liens or encumbrances remaining at the time of the sale). However, there are certain cities that also collect their own City Transfer Tax and those differ. Click here for an overview of the charges per county.

When is the Documentary Transfer Tax paid?
When the County Recorder receives the property transfer document (Grant Deed, for example) for recordation. The tax is paid together with the recording fee at the time the County Recorder receives the property transfer documentation. If this is through an escrow transaction, then the Documentary Transfer Tax is paid with all the other escrow closing costs and will show on the parties’ escrow closing statement.

Do people need to pay the Documentary Transfer Tax if they transfer their property to their children, or if they transfer the property to a trust?
Some property transactions are exempt. Those include: gifts between family members, transfers between individuals and their Revocable Trusts, and changes in property ownership that are the result of divorce settlements. So no, not if there was no actual money involved in the transfer.
If no Documentary Transfer Tax is declared, certain counties require an Affidavit to be completed, signed under penalty of perjury, and attached to the ownership document at the time of recordation.

What happens when a buyer assumes a loan from the seller?
This is an occasion when the documentary transfer tax does not reflect the actual sales value of a piece of property. If a buyer assumes responsibility for an existing loan or lien, the amount will not be included in the tax calculation. The tax is only on the actual money that exchanged hands in the transaction, not on the assumption of previous debt. This is a relatively rare case however. In most instances the documentary transfer tax will reflect the full sales value of the property.

Cam Hunter is the Title Representative for California Title Company and she is also part of my personal Real Estate Team. Thank you Cam for your help and great knowledge!

If you have any more questions about the Documentary Transfer Tax or any other Title issue you can visit www.caltitle.com or contact Jaleesa Peluso, Laguna Beach Realtor at Jaleesa@JaleesaPeluso.com.