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DID YOU KNOW THAT DELAWARE HAS THE HIGHEST STATE REALTY TRANSFER TAX IN AMERICA?

Many Delawareans, especially people of color, senior citizens and young families struggle to pay this tax – or give up the dream of homeownership.

A real estate transfer tax is a one-time tax or fee imposed by the state upon the transfer of real property, which is based on the price of the property transferred to the new owner.

“Delaware taxes homebuyers more than other states”
Delaware News Journal, Aug. 23, 2021

Back in 2017, the legislature voted to temporarily increase the Realty Transfer Tax to cover a budget deficit. The state no longer has a budget deficit. But the Realty Transfer Tax is still hurting:

  • Working-class families,

  • Minority families,

  • Seniors,

  • And younger generations just starting out.

The dream of homeownership is less achievable in Delaware where buyers need more cash for closing the sale. Delaware has the highest real estate transfer tax in the nation, making the average closing costs the second-highest behind Washington, D.C.

Realty Transfer Taxes are a huge burden on anyone buying or selling a property, including a home, land, or a business. The transfer tax amount in Delaware is what puts buyers out of reach when trying to buy their first home.

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In 2017, the Delaware General Assembly passed an Act to amend Title 30 of the Delaware Code relating to the Realty Transfer Tax (HB279) to close a budget deficit. HB279 raised the state’s portion of the Realty Transfer Tax from 1.5% to the current level of 2.5%.

Today when a home is sold in Delaware, a Realty Transfer Tax of 2.5% of the purchase price must be paid to the state to complete the sale of property from the seller to the new buyer. When combined with the local transfer tax, individuals can pay as much as 4% of the property’s value at the time of settlement on Realty Transfer Tax alone. If the property is in an area that does not impose a local transfer tax, the state Realty Transfer Tax rate is 3%.

For an average priced home at $250,000, the total Realty Transfer Tax due at settlement in Delaware is $10,000, usually split between the seller and buyer, and must be paid at closing. This tax can’t be rolled into the mortgage to be paid off over time. Families scrambling to pay this tax must put off other purchases for their new home, such as repairs, renovations, or furniture. They may even need to back out of the purchase of the home altogether.

REALTY TRANSFER TAX FACTS

ONE: Realty Transfer Taxes are a regressive tax because they place a greater financial burden on lower-income households compared to higher-income households.

TWO: Realty Transfer Taxes are also unfair because they are assessed against one type of asset — real estate — while similar taxes are rarely applied to financial assets such as stocks and bonds.

THREE: It is not only a burden, but the amount paid in taxes for property transfer far outweighs any government administrative costs associated with the purchase.

FOUR: Higher Realty Transfer Taxes discourage mobility among current property owners and discourage potential buyers from entering the market.