If you convey real estate property in Minnesota using a quitclaim deed, you may owe recording fees and state and federal taxes.
Recording Fees
- The basic recording fee is $46.00 for the document (Minn. Stat. § 357.18).
- If the property requires a well disclosure, the county recorder may also assess a $50.00 fee (Minn. Stat. § 103I.235).
Taxes
1. Deed Tax
Minn. Stat. § 287.21 establishes the amount of tax imposed on deeds transferring property.
Who Pays the Deed Tax?
The current owner, or grantor, typically pays deed tax on the consideration they received for the property conveyed via a quitclaim deed.
Exemptions to Deed Tax
Per Minn. Stat. § 287.22, the following real estate transactions are exempt:
- Deeds transferring cemetery lots.
- Deeds transferring real estate from a personal representative to a beneficiary.
- Deeds concerning foreclosures.
- Deeds modifying, granting, terminating, or creating an easement.
- Deeds transferring property pursuant to a divorce decree.
- Deeds conveying property upon the death of the owner.
- Deeds conveying property to or from the US government or any agency or instrumentality thereof.
Tax Rates
The state deed tax varies depending on the details of the real estate transfer. The following real property transfers are subject to a $1.65 flat tax:
- Transfers for business consolidations, mergers, or designated transfers.
- Transfers for no consideration or consideration of less than $3,000.
A tax of .0033 of the net consideration is assessed for any transfers with consideration greater than $3,000.
The same tax rate of .0033 is retroactively imposed on the property’s consideration if it is conveyed through a non-designated transfer within six months of a designated transfer for which the flat $1.65 tax was assessed. The seller may also be subject to a penalty for willful evasion under Minn. Stat. § 287.21.
2. U.S. Gift Tax (Form 709)
- Typically, there is no state gift tax imposed. However, if the real estate property you convey exceeds the exclusion amount listed under Minn. Stat. 291.016, your estate may be taxed. Speak with an estate planner or probate attorney to learn whether this tax will affect you.
- The IRS charges gift taxes for those whose value exceeds the annual exemption limit. If you are liable for gift tax, complete Form 709 with your annual tax return.
3. Capital Gains Tax
- The state includes capital gains as part of the grantor’s total income tax filing. This means the profit you make by transferring property via quitclaim deed is taxed at the standard tax rate for your annual income.
- Additionally, the IRS charges for long- and short-term capital gains over a certain value. Federal capital gains tax is calculated using your annual income, your profit from the property conveyance, and the length of time you owned the real estate interest.
