Transferring property in Rhode Island via a quitclaim deed comes with associated costs. For example, if you (as the grantor) don’t receive any consideration from the grantee, you must pay a gift tax if the property is worth more than a federally established amount. Explore the fees and taxes you may have to pay when filing a quitclaim deed.
Filing Fees
- Recording fees: It costs $84 to file the first page and an additional $1 for every subsequent page (RI Gen. Laws § 34-13-7 and RI Gen. Laws § 42-8.1-20).
Taxes
1. Real Estate Transfer Tax
The real estate transfer tax applies to every deed or other instrument that conveys an interest in real estate. The grantor must pay $2.30 per $500 or each fraction thereof (RI Gen. Laws § 44-25-1). The tax is $1.40 per $500 for mobile or manufactured homes.
Who Pays the Transfer Tax?
The seller or grantor must pay the tax unless there is a contrary agreement with the purchaser or grantee.
Exemptions to the Transfer Tax
The grantor doesn’t have to pay transfer tax for a quitclaim deed in the following circumstances:
- The grantor gives the deed to secure a debt.
- The grantor is the United States, Rhode Island, or a political subdivision thereof.
- There is a qualified sale of a manufactured or mobile home community to a resident-owned organization (outlined in RI Gen. Laws § 31-44-1).
- The transfer occurs among partners, members, or owners in a real estate company with respect to an affordable housing development (only relevant when specific conditions are met).
2. US Gift Tax
The grantor pays gift taxes (Form 709) on any property transfer involving zero consideration. The gift tax will apply even if the grantor didn’t intend the transfer to be a gift, such as an inheritance. The grantor typically pays the tax, but the grantee may pay if the parties agree. Properties may be subject to partial exclusion.
3. Capital Gains Tax
Both state and federal governments may impose taxes on property transfers via quitclaim deeds. The tax is assessed at the sale of the property by the grantee and could be substantial, depending on their basis and the sale price.
Rhode Island treats capital gains tax as ordinary income, so individuals can expect to be taxed between 3.75 and 5.99% (RI Gen. Laws § 44-30-2.6).
Additionally, federal capital gains taxes may apply. The IRS outlines capital gains tax information in Topic No. 409. The grantor must pay any associated capital gains tax if they sell the property for more than what they acquired it for. Grantees must pay capital gains tax if they later sell the property acquired through a quitclaim deed.