Real estate transfer taxes, which are imposed by states and counties, account for a portion of closing expenses and are often covered by the seller.
These levies aren’t always applicable. Indiana, for instance, has no transfer taxes. However, homeowners in Seattle can expect to spend $8,487 on these expenses.
Forget about trying to deduct transfer taxes when you file your tax return. These aren’t deductible to the seller, but they do reduce the amount realized on the sale of the home.
If the buyer winds up paying the transfer tax, it’s included in the cost basis of the property.
Overall, the calculus behind the tax benefits of homeownership is changing this year.
As of 2018, the Tax Cuts and Jobs Act placed a $10,000 cap on homeowners to claim state and local taxes, including property taxes.
Other changing tax breaks include the deduction for mortgage interest, which is now limited to loans of up to $750,000. That’s down from $1 million.
Further, under the new law, you can only deduct the interest on a home equity loan or home equity line of credit if you’re using the proceeds toward buying, building or substantially improving your home.
Previously, you were able to deduct the interest paid on loans of up to $100,000, regardless of how you used the money.
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