In Arkansas, any real estate transfer, including a quitclaim deed, can be subject to state and federal fees and taxes.
Recording Fees
A quitclaim deed must be submitted to the county recorder’s office in the county where the property is located. Per Ark. Code § 21-6-306, the recording fees for a quitclaim deed are $15 for the first one-sided page and $5 for each additional page.
Taxes
Taxes you may owe for transferring real estate via a quitclaim deed in Arkansas include transfer tax, federal gift tax, and capital gains tax.
1. Transfer Tax
Transfer tax applies to most real estate transfers in the state of Arkansas that involve consideration over $100. This includes quitclaim deeds. Per Ark. Code § 26-60-106, the responsibility for paying transfer tax is divided equally between the grantor and grantee unless the parties agree otherwise. You should pay the transfer tax when you convey the property to the new owner.
Not all real estate transfers are subject to transfer tax. Arkansas allows exemptions to real property transfer tax under the following circumstances:
- When the grantor or grantee is part of the government of the United States or the state of Arkansas.
- When the deed is only to secure a debt.
- When the deed transfers land sold for delinquent taxes.
- When the deed conveys land-only leasehold interest.
- When the deed grants timber removal rights for 24 months or less.
- When the quitclaim deed is part of a divorce action.
- When the quitclaim deed is to enforce a security interest.
- When the quitclaim deed conveys a home financed by the Federal Housing Administration, United States Department of Veterans Affairs, or United States Department of Agriculture Rural Development, as long as the sale price is $60,000 or less and the buyer or their spouse has not owned a home within the past three years.
- When the quitclaim deed conveys land between business entities, shareholders, or partners.
- When the consideration for the property is $100 or less.
Other exceptions may apply. If you are unsure of the property tax amount, contact your local circuit court clerk or a real estate attorney in your area. Failure to pay appropriate taxes can void your Arkansas quitclaim deed.
Ark. Code § 26-60-105 outlines the tax rates for real estate property transfers in Arkansas. For land transfers with consideration over $100, the state assesses a transfer tax of $3.30 for every $1,000 or fraction thereof.
2. U.S. Gift Tax (Form 709)
The federal government requires people to pay taxes on gifts over a certain amount. If the grantor gifts property greater than a particular value without full consideration, they may be liable to pay gift tax. To pay gift tax on a property you conveyed, file Form 709 with your annual income tax return. Exceptions to US gift tax include:
- Gifts worth less than the annual exclusion, as designated each year by the Internal Revenue Service (IRS).
- Gifts to your spouse.
- Gifts to a political organization.
- Tuition or medical expenses.
Charity gifts are also deductible, so if you used a quitclaim deed to transfer property to a qualifying charitable organization, you may be able to use the credit to offset the gift tax you owe.
3. Capital Gains Tax
Arkansas and the federal government charge taxes on capital gains. Capital gains tax applies to real estate in Arkansas when the seller makes a profit from the property sale. The tax percentage varies depending on the following:
- How long you owned the home before you sold it.
- How much you profited from the sale.
- Your annual household income.
- Whether you lived in the home for at least two out of the past five years.
If you report a capital gain on your federal income tax return, you will probably also owe state capital gains tax in Arkansas. However, the amount you owe may be different. The federal government also has different exceptions and limitations. That means you may still owe Arkansas state capital gains tax even if you do not owe the federal government.