What is a transfer tax?

A transfer tax refers specifically to a one-time tax that is levied when ownership of a property is transferred from one party to another. This tax is typically calculated as a percentage of the sale price or assessed value of the property being purchased. It is important to note that this tax is paid at the time of the closing process during a real estate transaction.

This type of tax serves as a way for state or local governments to generate revenue during real estate transactions, and it is generally the responsibility of the seller or the buyer, depending on local laws and customs. Unlike recurring taxes, such as property taxes which are assessed annually based on ownership, the transfer tax is a singular charge that relates specifically to the act of changing ownership.

The other options describe different aspects of real estate transactions but do not accurately define what a transfer tax is. For example, fees for property appraisals or recurring taxes on property ownership are not related to the act of transferring property. Likewise, while there may be taxes on certain sales above specific price thresholds, these do not encompass the broad concept of a transfer tax, which occurs irrespective of price stipulations.