Many first-time home sellers in Massachusetts are unaware they need to pay deed stamps, also known as excise tax, stamp tax, conveyance tax, or transfer tax. Besides the real estate commission, deed stamps are typically the largest expense when selling or transferring a property, so you want to budget for it well in advance.
What Are Deed Stamps?
Deed stamps are a tax on selling or transferring real estate in Massachusetts. Each county sets its own tax rate. In most cases, it’s $4.56 per thousand dollars of the purchase price. So, if you sell your home for $500,000, you would owe the Massachusetts Department of Revenue $4.56 x 500 or $2,280.
Stamp tax is due at closing. You must pay it at the Registry of Deeds in the municipality where the property is located. Excise stamps will be affixed to the deed or transfer document as proof of payment.
When Are Deed Stamps Required in Massachusetts?
Massachusetts law requires the payment of excise tax any time you transfer, grant, assign, or otherwise convey real estate and the actual consideration or contractual price exceeds $100. That means excise tax isn’t only due on deeds and other instruments that will be recorded in the Registry of Deeds. As you’ll see below, an excise tax is also payable even when you’re not recording the deal.
You don’t owe excise tax on gift transfers and transactions with nominal consideration of $100 or less. However, you may still have to pay recording fees depending on the nature of the transaction.
Deed Stamps Are Due Even When You’re Not Recording the Deal
There is a popular misunderstanding in Massachusetts that you only owe excise tax when you transfer real estate and record the deed or other instrument in the Registry of Deeds. Excise tax is also due for non-recordable deals, such as:
- Transfer of an interest in a nominee trust: Many Massachusetts properties are owned under a nominee trust. The beneficiaries can terminate the trust at any time, and the trustee may only act per the directions of the beneficiaries. For this reason, state courts often treat beneficiaries as the property’s true owners. Thus, sales and transfers of beneficial interests in nominee trusts for consideration exceeding $100 are subject to stamp tax, even though the title to the property remains unchanged, and the transfer documents may not be recorded.
- Entry into a 99-year lease: The Massachusetts Department of Revenue (DOR) has ruled that ordinary leases, such as 10-year leases renewable for another 10 years, aren’t taxable. However, leases that cover extensive periods or are indefinitely renewable are subject to excise tax.
- Exchange of properties: Stamp duty is due when exchanging two parcels of real estate if the consideration is greater than $100. Both parties in the exchange must pay an excise tax for their respective properties.
Confused About Deed Stamps? Talk to an Experienced Real Estate Attorney Today
Selling and transferring real estate in Massachusetts is complicated. At Jordan & White, we can help you navigate the process with confidence and avoid potentially costly mistakes. Call (978) 744-2811 or contact us online to schedule your consultation with a real estate attorney in Danvers, MA.