Understanding and Analyzing Municipal Real Estate Transfer Taxes

Overview

There are three things that are certain in life: birth, death, and taxes. While we don’t like paying them, they play an important role in helping fund public services, like police and fire departments, schools, and garbage collection. They can hit us from all corners, but one area of taxation where people seem to have a direct relationship with is property taxes.

Aside from paying taxes on the property you own, real estate transfer taxes are also imposed when you purchase or transfer property. While everyone pays these taxes to the state (50 cents for every $500 of value in property), some municipalities have implemented their own via ordinance. This piece looks at real estate transfer taxes at the municipal level.

Real Estate Transfer Taxes and Home Rule Municipalities

Certain Illinois municipalities have “home rule” status, meaning that they can impose it’s own policy initiatives, like taxation, in addition to the state. To read more about “home rule,” please click here.

There are about 69 municipalities in the state that impose a real estate transfer tax. This tax can be imposed on the buyer, seller, or both and the municipality ultimately decides on the party liable. Additionally, every county in Illinois has the power to impose such taxation as well. Under Illinois statute, counties may impose a tax of 25 cents per $500 of value on transactions.

Analyzing Municipal Real Estate Taxes

The Illinois’ Realtors Association has done a good job at listing which municipalities have a transfer tax. Prairie State Policy has analyzed this data further to ascertain findings and trends when it comes to tax amounts and which party has to pay the tax upon transfer. The full data set can be found here. Here are some of the highlights:

  • The municipalities that imposed the highest tax, $10 per $1,000 in value, are Cicero, Berwyn, and Harwood Heights, with Oak Park and Calumet City coming in a close second with $8 per $1,000.
  • The municipality that imposed the lowest tax was Dolton with a flat rate of only $10 per property.
    • Like Dolton, five other municipalities impose a flat rate. For three of the six total, this is just $25. Countryside and Bedford Park impose a flat fee of $50, the highest.
  • Most municipalities implement a tax of $3 per $1,000 in property value (20 of the 69). The next most common amount of taxation was $5 per $1,000. Here, 17 of the 69 municipalities imposed a tax of $5 per $1,000 in value.
  • When it comes to which party is liable to pay the tax, in most cases it is the seller.
    • About 45 of the 69 municipalities impose the tax on just the seller
    • About 17 of the 69 municipalities impose the tax on just the buyer
    • About 4 of the 69 municipalities require the tax to be split between the buyer and seller. Chicago is probably the most unique in this fashion, as it requires the buyer and seller to pay different amounts.

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