Staring at your closing estimate and wondering what the “transfer tax” line means? You are not alone. When you buy or sell in Chicago, more than one government can tax the transfer, and who pays is often a negotiated line item in your contract. In this guide, you will learn what the Chicago transfer tax covers, who typically pays in our market, how to estimate the amount, and what to do next so you are not surprised at the closing table. Let’s dive in.
Chicago transfer tax basics
A real estate transfer tax is a charge when property ownership changes hands. In the City of Chicago, three levels can apply on the same deal:
- City of Chicago
- Cook County
- State of Illinois
You add these together to get the total transfer tax on the transaction. Transfer tax is separate from mortgage recording fees, lender costs, or income taxes.
Who pays in Chicago
Payment is a contract term, which means it is negotiable. In Chicago, many buyers and sellers follow the standard contract forms and the title company’s usual allocation. Custom can shift with market conditions, so do not assume. Confirm your agreement in writing and review the settlement statement before closing.
Key points:
- Your purchase contract decides who is charged for which transfer taxes.
- The title company or closing attorney calculates the amounts and places them on your Closing Disclosure.
- If you want a different split, negotiate it up front.
How to calculate transfer tax
Transfer taxes are usually quoted as a rate applied to the sale price, sometimes shown as dollars per $100 or $500 of consideration, and sometimes as a percentage. Both formats describe the same math.
Basic formula:
- Total transfer tax = sale price × (city rate + county rate + state rate)
Hypothetical example (for illustration only)
This example uses placeholder rates to show the math. Do not rely on these figures for your closing; always confirm current rates with your title company.
- Sale price: $400,000
- City rate: 0.75% (example)
- County rate: 0.25% (example)
- State rate: 0.10% (example)
Calculation:
- City tax = $400,000 × 0.0075 = $3,000
- County tax = $400,000 × 0.0025 = $1,000
- State tax = $400,000 × 0.0010 = $400
- Total transfer tax = $4,400
Again, these numbers are illustrative. Ask your title company for an itemized estimate based on the current Chicago, Cook County, and Illinois rates.
Exemptions and exceptions
Some transfers qualify for exemptions or special handling. Common categories include:
- Transfers between spouses or incident to divorce
- Transfers to or from government entities
- Transfers to qualified charities or certain nonprofits
- Transfers by will, intestacy, or probate
- Certain foreclosure-related transfers or deeds in lieu
- Some entity-to-entity transfers, trusts, or bulk transactions with special rules
Even if a transfer is exempt, you may still need to record specific exemption forms. If you do not provide the right paperwork, the recorder can reject the deed or assess the tax.
Note: FIRPTA withholding, capital gains, and other income tax matters are different from transfer taxes. These affect proceeds but are not the same charge.
Payment and recording
In Chicago-area closings, the title company or closing attorney typically:
- Prepares the deed and transfer tax forms
- Collects transfer taxes at closing
- Remits them to the correct offices at or before recording
Transfer taxes appear as debits on the buyer or seller side according to the contract, and they reduce a seller’s net proceeds unless the buyer agrees to cover them.
What to do next
If you are buying or selling in Chicago or Cook County, take these steps early:
- At contract stage
- Check the clause that assigns transfer taxes. If you prefer a different split, negotiate it before attorney review ends.
- Ask your agent for current local practice by property type and neighborhood.
- Before closing
- Request a written, itemized closing estimate from the title company, including city, county, and state transfer taxes.
- If you believe you qualify for an exemption, gather the required documentation and exemption forms in advance.
- Professional guidance
- For tax strategy beyond transfer taxes, consult your CPA or tax attorney, especially for 1031 exchanges, FIRPTA, or estate-related transfers.
Common scenarios in our market
- Condos vs. single-family homes: Rules can differ for condominiums, multi-unit buildings, or bulk transfers. Ask your title company for guidance tailored to your property.
- New construction and assignments: Developer sales and assignment contracts may use different procedures or allocations. Confirm how transfer taxes are handled before you sign.
- Market shifts: In a competitive market, some buyers offer to cover more closing costs. In a slower market, sellers may offer credits. Align your transfer tax strategy with your pricing and negotiation plan.
Budgeting tips for sellers
- Price strategy: Factor expected transfer taxes into your net sheet when setting list price and evaluating offers.
- Concessions: If you agree to pay more of the buyer’s costs, be sure your net still supports your goals.
- Timing: Transfer taxes are due at recording. Delays can occur if forms are incomplete or funds are short. Double-check wire totals before closing.
Budgeting tips for buyers
- Offer terms: If you plan to ask the seller to cover specific transfer taxes, state it clearly in your offer.
- Closing costs: Transfer taxes are separate from lender and escrow fees. Build them into your cash-to-close plan if your contract assigns you any portion.
- Condo diligence: For condos and townhomes, ask early about any building-specific requirements that could affect timing or paperwork.
The near-north advantage
Near-north properties often involve higher price points and more complex deal structures. Having a broker who regularly coordinates with title teams on city, county, and state transfer taxes can save time and reduce friction. With decades of experience across Lincoln Park, Near North, East Lakeview, West Town, and The Loop, you can count on clear estimates and a smooth path to recording.
Ready to plan your sale or purchase with confidence? Reach out to Anton Ursini for a precise, itemized transfer tax estimate aligned with your contract and timeline.
FAQs
What is the Chicago real estate transfer tax?
- It is a tax charged when property ownership transfers, and it can include city, county, and state portions that you add together for a total.
Who pays transfer tax in a Chicago closing?
- It is negotiable and set by your contract. Many deals follow standard forms and title company practice, so confirm the allocation in writing.
How do I estimate how much I will pay?
- Multiply the sale price by each applicable rate and add them together. Ask your title company for a current, itemized estimate for Chicago, Cook County, and Illinois.
Are there exemptions to Chicago transfer taxes?
- Yes. Common examples include certain transfers between spouses, to government entities, to qualified charities, through probate, or related to foreclosure. Documentation is required.
When are transfer taxes paid in Chicago?
- They are collected at closing and remitted at or before recording the deed. Missing forms or funds can delay recording.
Is FIRPTA the same as transfer tax?
- No. FIRPTA is a federal income tax withholding for some foreign sellers. It is separate from city, county, and state transfer taxes.
Do condos follow different transfer tax rules?
- They can. Condominiums, multi-unit buildings, developer sales, and assignments may have different procedures. Confirm details with your title company.
