A special tax return is triggered if you give a gift and exceed the gift tax limit.
What is conveyance tax?
Conveyance tax is levied on the transfer of real property at the county, municipal or state level. It is computed as a sale price percentage and is also known as real estate transfer tax.
Conveyance tax varies by how it is levied based on the area and the parties exchanging the property. It is also imposed on the transfer of land ownership from a seller to a buyer, using a deed since it cannot be transferred by other means including a mere contract of sale.
The conveyance tax increases in some jurisdictions as the sale price of property increases, but it is a flat rate in others. While the conveyance taxes at the state and municipal levels are common, federal conveyance taxes are not applicable.
The rates of conveyance tax always consist of a flat percentage fee, and in rare cases, conveyance tax in some states also can be a flat tax. In other instances, conveyance tax rates in a state differ, depending on the value of the property being transferred.
Sellers face county, municipal and state conveyance taxes in some areas, while the fee varies depending on the type of property sold in other cases. Traditionally, conveyance tax is paid by the seller. However, both the buyer and the seller must pay the tax in some states like New Hampshire.
Conveyance tax example
Conveyance tax levied on the sale of a home in Connecticut is 0.5 percent on the initial $800,000 and 1 percent on the additional value. Local towns also charge 0.25 percent and can impose an additional 0.25 percent when the town is in an economic development zone. The seller pays the tax, and the town clerk collects it when the deed is filed.
The calculation of conveyance tax for a property worth $575,000 in Connecticut with a 0.005 state tax and a 0.0025 local town charge is as follows:
The conveyance tax will be $575,000(0.005+0.0025) = $4,312.50