What is the Documentary Stamp Tax?
In Florida, the documentary stamp tax is a tax levied on certain documents that are executed, delivered, or recorded. It primarily applies to real estate and financial documents, including deeds, bonds, promissory notes, mortgages, and liens. The tax is typically paid to the county clerk of court upon recording of the document. If the document is not recorded, the tax is paid to the Florida Department of Revenue. Like all taxes, its purpose is to collect revenue.
How to Calculate the price
The price of the tax varies based on the type of document. For instance, the tax for real estate deeds is $.70 per $100, rounded up, based on the total purchase price. For instance, if you purchase a property for $300,000, the tax would be $2,100 ($300,000 / $100 x $0.70).
However, there is an exception for properties in Miami-Dade County. For single-family residences in Miami-Dade County, the tax rate is $.60 per $100. For other properties in Miami-Dade County, the tax rate is $.60 plus $.45 surtax per $100.
For mortgages, the tax rate is $.35 per $100, rounded up, based on the amount financed. As an example, a $200,000 mortgage would incur a tax of $700 ($200,000 / $100 x $0.35). Additionally, many online county websites provide calculators which allow you to input the purchase price and loan amount in order to determine the tax for the buyers and sellers of real estate.
For bonds, the tax rate is $.35 per $100 based on the face value of the bond. The tax can be paid via a secure web application or a paper Documentary Stamp Tax Return for Registered Taxpayers’ Unrecorded Documents (Form DR-225). Additionally, taxpayers who paid $20,000 or more during the most recent fiscal year must pay electronically in the following year.
Who is Responsible for Paying?
In most real estate transactions, the seller typically pays this tax on the deed, while the borrower usually pays the tax on the mortgage. However, the terms can be negotiated between the parties involved. It’s important to clarify these details in the contract with both parties involved and a lawyer to avoid any surprises.
Who is Exempt from Paying?
This tax does not apply when property is transferred between spouses, often as part of divorce settlements or for estate planning. Additionally, transactions involving government entities or certain tax-exempt organizations may also be exempt. Some tax-exempt government entities include United States government agencies, Florida government agencies, Florida’s counties, municipalities, and political subdivisions. If a party is exempt from the tax, then the tax is still required to be paid by the non-exempt party.
Be Proactive!
This tax is an integral part of the real estate and financial landscape in Florida. Whether you’re buying a new home, refinancing a mortgage, or executing other financial documents, understanding this tax can help you better manage your financial obligations and avoid potential issues during your transactions. It is essential that the tax is paid promptly and in full to avoid any penalties for issues with recording and to avoid interest for over or underpayment. Additionally, filing protocols, tax rates, and legislative changes vary by county and state. Thus, it is always a good idea to consult with a real estate or tax attorney to ensure that you’re fully informed and compliant with all applicable regulations.
