If you’re planning to sell a home in Kentucky, it’s important to understand the costs involved — including the Kentucky real estate transfer tax. A transfer tax is a fee the state charges when property changes hands, typically calculated based on the sale price.
In this short guide, we’ll break down how transfer taxes work in Kentucky and what you can expect to pay when you sell your property. We’ll also cover who typically pays the tax, whether local governments charge their own fees, and which exemptions might apply.
Connect with a Top Agent to Help Maximize Value
Even rockstar agents can’t make your tax liability disappear, but HomeLight data shows that the top 5% of agents across the U.S. help clients sell their home for as much as 10% more than the average real estate agent, helping offset the tax bill.
What are transfer taxes?
Real estate transfer taxes are fees charged by the government when a property’s title is officially transferred from one owner to another. According to the Federal Trade Commission, these taxes are assessed at the state or local level when ownership changes hands. The title represents your legal claim to the property, and when you sell your home, passing that claim to the buyer typically triggers a transfer tax.
The exact amount you’ll owe depends on where your property is located, as each state, county, or municipality may have its own tax rate and rules. In general, transfer taxes are one of several costs that support public services and generate revenue for local and state governments.
Who pays for transfer taxes?
The responsibility of who pays transfer taxes depends on the state, city, or municipality where a property changes hands.
In Kentucky, sellers are responsible for paying any transfer taxes.
What are the types of transfer taxes?
Transfer taxes will typically vary based on local guidelines, but can generally vary by state, county, or city guidelines. Here’s a quick look at how it works in Kentucky:
State transfer taxes
Kentucky sellers are charged a transfer tax of $0.50 for each $500 of the property’s value.
Other transfer fees
In addition to transfer taxes, there are possible fees to consider, such as from a homeowner’s association or another local neighborhood organization. Again, as these can vary heavily based on location, it’s important to consult a professional.
If you’re selling your home for sale by owner, consulting a professional might help with some of the finer points of the process and give you a better idea of what you can expect.
Are transfer taxes deductible?
Real estate transfer taxes are not deductible on your federal income tax return. However, they may still offer some tax benefits when it comes time to calculate your capital gains from the sale of your home.
If you turn a profit on your home sale, the IRS allows you to count certain expenses, like real estate commissions, legal fees, and transfer taxes as selling costs. These costs can be subtracted from your home’s final sale price, effectively reducing the amount of taxable gain. While this doesn’t eliminate the transfer tax itself, it can help minimize your tax liability on any earnings from the sale.
Transfer tax exemptions
Kentucky sellers might qualify for exemptions, depending on the circumstances of their home sale. Here are some examples where a transfer tax exemption could apply:
- Transfers recorded before March 27, 1968
- Transfers to or from the U.S. government, the state of Kentucky, or local governments (including deeds of gift or nominal consideration)
- Transfers made solely to provide or release security for a debt
- Deeds that confirm or correct previously recorded deeds
- Transfers between spouses or as part of a divorce
- Sales made to settle delinquent taxes or assessments
- Transfers due to a property partition
- Transfers from mergers, consolidations, or business entity conversions
For a complete list, consult the Kentucky statute on real estate transfer taxes.
Estimating transfer taxes for your home sale
To get a better idea of what you might walk away with after selling your Kentucky home, try using HomeLight’s Net Proceeds Calculator. This free tool factors in key expenses like agent commissions, transfer taxes, and repair costs to help you estimate your bottom line.
For a more detailed breakdown, it’s smart to connect with a top real estate agent. An experienced local agent can help clarify your likely transfer tax obligations and whether there’s room to negotiate who pays what based on current market dynamics. Getting a professional opinion upfront can help you avoid surprises at the closing table.
Editor’s note: This post is for educational purposes only and does not constitute legal or financial advice. Links and mentions of Kentucky area tax services or attorneys should not be considered endorsements.
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