Realty Transfer Tax is a charge levied on the transfer of ownership or title to property from one individual or entity to another. The collection method of transfer tax is different in each state. For example, in New Jersey, the seller usually only pays the state tax. In New York City, both the state tax and the city tax are required. In New York, the buyer also needs to pay Mortgage Tax (loan tax) if he/she has a loan.

Compared with other states, California’s Realty Transfer tax is relatively low. The California Documentary Transfer Tax Act imposes a $1.10 tax on every $1,000 value. However, some cities in California will also charge an additional Realty Transfer tax on this basis. For example, the City of Los Angeles will impose an additional $4.50 tax on every $1,000 value. Therefore, investors need to know the tax rate of each place in order to have a better budget for buying a house.

As the name suggests, real estate tax is the tax that real estate owners pay to the local municipal government every year. Real estate tax is generally calculated annually. Higher house price means higher real estate tax. Generally, real estate taxes are used for municipalities, counties, school districts, community colleges and other government agencies. Real estate tax is a federal personal income tax deduction item, and can also be used to deduct state income tax, but the regulations vary from state to state.

When buying and selling a house, the seller should disclose the house’s property tax of the past year, or the past few years. This information is usually listed on the seller’s brokerage listing (MLS). If not, the buyer can check with the tax department of the municipal government. The property investigation report can also show the land tax collection accurately. Some municipalities will re-evaluate and levy land tax during transfer of property. Some municipalities adjust the land tax every 3 to 4 years. Therefore, as a buyer, you should check in advance and understand how much land tax you will pay in the future. This will help you to decide whether you should buy a house or not.

Real estate taxes and the benefits of a million dollar loan can be used to deduct federal income taxes. In addition, the interest on the second loan (usually the Home Equity Loan) of not more than US$100,000 is also deductible for income tax. But note that the total amount of the two loans cannot exceed the reasonable market value of the house.

In addition, the property tax and loan interest can only be deducted when the itemized deduction method is used in the tax declaration. New house buyers can also deduct points. House refinancers cannot deduct such expenses. Other expenses in housing transactions, such as real estate transaction tax, attorney fees, registration fees, loan company credit report fees, and valuation fees, are non-deductible expenses.

Generally, if the property value increases, the capital gain (profit) through house selling may be subject to income tax. The U.S. Federal Revenue Service has certain tax incentives on the sales profits of the primary residence. If you have lived in the house for two years in the past five years, the portion of your profit from selling the house that is less than US$250,000 (a couple of US$500,000) does not need to pay capital gains tax. Only the amount over this amount is taxed.

However, this reduction does not apply to non-primary self-occupied homes such as Investment Property and Vacation Home. For a dual-use house (Duplex), the part used for the seller's main residence can enjoy this discount. However, the capital gains tax must be declared for the rented unit.

The profit from selling a house is the adjusted sale price (Adjusted Sale Price) minus the adjusted cost (Adjusted Cost Basis). The adjusted cost is the purchase price (Purchase Price) minus sales commissions, legal fees, etc. The adjusted selling price is the Selling Price minus the Cost of Capital Improvement.

The Internal Revenue Service (IRS) has strict control over the cost of renovation. For example, the cost of repairing the water heater cannot be classified as the cost of renovation, but installing a dishwasher is fine. For another example, you can deduct the wages of employees but not your own wages. The IRS also requires the seller to declare detailed profit calculations every year, so the receipt of the renovation cost should be kept properly for inquiries.