Creating a quitclaim deed in Massachusetts comes with filing fees and the responsibility of paying state and federal taxes. Read on to explore what you may owe when filing this legal document.
Filing Fees
The grantor must pay the filing fee for their quitclaim deed to the Registry of Deeds Office. Massachusetts charges a $155 filing fee for most deeds, including quitclaim deeds.
Taxes
1. Real Estate Transfer Tax
The real estate transfer tax is $2.00 per $500 of taxable property value (Directive 89-14: Exchange of Property). Please note that individual counties can set an additional transfer tax. Most counties impose an additional 14% of the imposed tax, making the effective rate $2.28 per $500 of property value. Barnstable is one county with a higher rate of $2.85 per $500 of property value.
Exemptions to the Transfer Tax
Massachusetts allows some exemptions to the transfer tax, including cases in which the consideration involved in the property exchange is less than $100 (Mass. Gen. Laws ch. 64D § 1). This means that in the case of gifted real estate, while the grantor must pay filing fees, they may not be subject to transfer taxes.
Please consult a tax professional or real estate lawyer to ensure you understand the tax implications of your specific property transfer, including whether it may be exempt from transfer taxes.
2. US Gift Tax
The IRS assesses gift taxes on high-value gifts, including real estate gifts. Even though the IRS defines a yearly amount the grantor can give to each recipient (for 2024, it’s $18,000 per recipient) without being subject to the gift tax, most real estate transactions will exceed this amount. Therefore, you should prepare to pay a gift tax as part of a gifted real estate transaction.
3. Capital Gains Tax
Massachusetts charges capital gains tax at varying rates depending on whether you held the property for more than one year. If you held the property for more than one year and sold it for more than you bought it, you must pay a 5% long-term capital gains tax. If you held the property for less than one year and sold it for a profit, you must pay an 8.5% short-term capital gains tax.
In addition to state taxes, grantors must also pay federal capital gains tax, detailed in Topic no. 409. Short-term capital gains are subject to the federal ordinary income tax rates, while long-term capital gains are subject to the special federal rates of 0, 15, or 20%, depending on your taxable income bracket.
