When you convey property via a quitclaim deed, whether as a gift or sale, you may owe registration fees and taxes for the transfer.
Recording Fees
County clerks assess recording fees for recording deeds. § 64.012 establishes a starting rate of $33 for documents that are five pages or less, with $3.00 for each additional page over five.
However, § 142.010 allows the county clerk to assess additional recording fees and taxes, including $4 for each conveyance of real property. Thus, taxes can differ depending on the county and the details of your quitclaim deed.
The recording fee must be paid at the time of registration, so consider contacting the clerk in the county where your property is located in advance to find out how much you will owe.
Taxes
For property transfers with a quitclaim deed, you may owe state and county transfer tax, US gift tax, and capital gains taxes on a federal, state, and local level.
1. Transfer Tax
For properties transferred with consideration, Kentucky charges a transfer tax, per § 142.050.
Who Pays the Transfer Tax?
The tax is assessed against the current property owner or grantor conveying the property.
Exemptions to Transfer Tax
The following title transfers are not subject to transfer tax, per § 142.050:
- Gifts or deeds with nominal consideration to or from US, state, city, or county government entities, agencies, or subdivisions
- Deeds that provide security or release a debt or obligation
- Deeds between spouses
- Deeds between former spouses as part of a divorce
- Deeds for delinquent taxes or assessments
- Deeds on partition
- Deeds transferring property in a merger, consolidation, or conversion of a business
- Deeds transferring property between a subsidiary and its parent corporation for nominal or no consideration, or consideration of the cancellation or surrender of stock
- Deeds under foreclosure or in lieu of foreclosure
- Deeds between a parent and child or grandparent and child with nominal consideration
- Deeds transferring property to a shareholder or owner upon dissolution of a company
- Deeds between an LLC and any of its members
- Deeds between a trustee and a successor trustee
Tax Rates
Transfer tax is computed based on the full actual consideration indicated on the quitclaim deed. If the property is a gift with no or nominal consideration, the tax is based on the estimated property value. The rate is $0.50 for every $500 in value or fraction thereof.
2. US Gift Tax (Form 709)
Kentucky does not have a gift tax, but the federal government may charge the grantor of a gift conveyed via quitclaim deed. The Internal Revenue Service (IRS) annually establishes a gift tax exemption limit. If the value of the gifted property exceeds the exemption limit in the year the property is conveyed, the grantor must pay gift tax.
The latest gift tax information and exemption amounts are on the IRS website. If you owe gift tax on the quitclaim transfer, you may submit Form 709 and your income tax return for that year.
3. Capital Gains Tax
Kentucky charges individuals and businesses for business capital gains over a certain amount. If your quitclaim deed involved transferring property for consideration, you may owe capital gains tax on the profit you made from the sale. Kentucky charges a state capital gains rate established annually by the Kentucky Department of Revenue.
Local jurisdictions may also charge a capital gains tax for property sold for a profit. Check with your local taxpayer service center to learn more about local capital gains tax rates and how to file.
In addition, the IRS charges capital gains taxes for profits on real estate transfers over a certain amount. The IRS calculates capital gains based on your profit from the real estate transfer, your total annual income, and the time you owned the transferred property.
