Real Property Transfer Taxes in Florida – How are you affected?
It’s safe to say that no one likes to pay taxes! As such, one of the most common inquiries we receive from our clients is whether doc stamps are due when recording a transfer deeds. With a few exceptions, my response is inevitably “yes”.
Understanding Real Property Transfer Taxes in Florida
In Florida, real estate transfer taxes, also known as a stamp tax or doc stamp, are imposed on the transfer of any residential and commercial property and any written obligation to repay the money, whether secured or unsecured.
Different tax rates apply to transfers of property versus obligations to repay debts.
Property Transfer Stamp Tax
Although it is a negotiable term, purchase and sale contracts usually call for stamp taxes incurred on the transfer of the real property to be paid by the seller in the transaction and the rate of the stamp tax is based on the consideration exchanged in the contract (usually the purchase price).
In all Florida counties other than Miami-Dade County, the stamp tax owed is $.70 per $1000, or a rate of 0.7%. The consideration is rounded up to the nearest increment of $100. Fla. Stat. Ann. § 201.02(1).
In Miami-Dade County, however, the stamp tax rate is $.60 per $1000, or a rate of 0.6% for transfers of single-family residences.
Further, for all other types of transfers in Miami-Dade County, there is an additional tax of $.45 per $1000 that is due to the payment of the 0.6% due on the sale of a single-family residence.
In Florida, stamp taxes are not assessed if consideration is not exchanged in connection with the transfer.
For example, if a property is gifted to a transferee via a quitclaim deed AND there is no mortgage obligation recorded against the property, the parties may argue that no consideration is being exchanged and, therefore, no stamp taxes are due.
If, however, there is an outstanding mortgage on the property when it is gifted or transferred by a quitclaim deed, then the stamp tax is owed and would be calculated based on the full consideration, or the outstanding balance of the mortgage if it is assumed by the transferee.
If the mortgage is paid off as part of the transfer, then the only stamp tax that would be due is the consideration for the transfer itself (not the obligation).
Other forms of consideration are any funds paid or agreed to be paid for the transfer, the discharge of any outstanding debt owed on the property, and the value of any other property exchanged for the real property.
Mortgage Stamp Tax
The stamp tax due on a mortgage or loan secured by real property in Florida is paid by the buyer or borrower.
The amount of taxes due will be based on the amount being financed and stated in the mortgage instrument.
In Florida, pursuant to Fla. Stat. Ann. § 201.08(1), the tax rate for stamp tax based on an obligation is $.35 for every $100 of the obligation and is calculated based on the amount of the secured indebtedness.
Intangible Stamp Tax
Florida also charges an “intangible tax” on written obligations to pay money not secured by real property that are signed, executed, or delivered in Florida, such as demand notes or term notes, in addition to the stamp tax that is imposed on transfers of real property and loans secured by real property.
Similarly to mortgage stamp tax, the tax rate on an unsecured written obligation to pay money is $.35 for each $100 of the obligation.
But while there is no cap on the amount of stamp tax due with respect to a mortgage, Fla. Stat. Ann. § 201.08(2) caps the maximum amount of stamp tax due on loans not secured by real property(i.e. intangible obligations)at $2,450.
Thereafter, if an unsecured obligation (where the maximum amount of intangible stamp tax was remitted) becomes an obligation secured by real property, the maximum payment of $2,450 is deducted from the amount due and owing with respect to the mortgage.
Which Transactions Are Exempt from the Payment of Transfer Tax?
Certain transactions are specifically exempt from the payment of transfer taxes in Florida. They include:
- A transfer pursuant to a dissolution of marriage from one former spouse, or to-be former spouse, to another;
- Transfers by the grantor or trustee of an irrevocable trust or living trust into the trust for purposes of estate planning;
- The sale of a home when relocating for work purposes;
- Certain gifts when no consideration is exchanged; and
- Certain transfers from a non-profit entity to a governmental entity.
How do you pay for stamp tax?
In Florida, stamp tax is payable at the time of execution of a particular document such as the deed or the mortgage.
However, it is typically collected for remittance at a closing or other time at which the consideration is exchanged.
These taxes are due and payable on or before the 20th day following the month in which consideration is paid and can be paid using the Florida Department of Revenue’s secure website.
Although, practically speaking, practitioners and attorneys pay taxes on behalf of buyers and sellers when submitting the particular documents for recording.
What happens if you fail to pay the stamp tax?
Oftentimes, parties purposefully choose not to state the amount of consideration on the transfer deed but instead only state a nominal amount at the time of recording the deed.
This does not preclude them from owing stamp tax on the full consideration paid for the transfer of the property, which must be declared to the Florida Department of Revenue.
Pursuant to Fla. Stat. Ann. § 201.17(1), failure to pay the tax owed when due is a misdemeanor of the first degree. Once discovered, failure to pay full stamp tax may lead to penalties beyond the tax payment as it may also include interest.
In the situations of non-payment or underpayment of stamp tax, the penalty is 10% if paid in less than 30 days after the due date with an additional 10% penalty for each additional 30 days or part thereof, not to exceed 50% of the tax owed. If the deficiency is determined to be a result of fraud, the penalty is 200% of the tax owed.
It should be noted, that while failure to pay the stamp tax does not affect the validity of the transfer deed, the particular county may refuse to accept the document for recording without the payment of the stamp tax upfront.
While transferring real property via a transfer deed may seem like an easy solution, it is always advisable to make sure that transfer taxes will not be assessed as a result of your transfer prior to taking any action.
Not only can such taxes result in costs that were not originally considered, but failure to pay these costs may have further dire unintended consequences and costs, including penalties.
To determine whether your transfer is subject to Florida transfer taxes, be sure to contact a qualified attorney to assess your specific needs and situation.