A quitclaim deed is an instrument that is used to transfer ownership of a home to someone else. In addition to recording fees, the new owner is responsible for paying transfer taxes on the sale price of the property. However, there are certain exceptions when property is transferred using a quitclaim deed. If a qualified exemption is claimed, the grantee can avoid paying taxes on the transaction.
When to Use a Quitclaim Deed
Unlike a warranty deed, the quitclaim doesn't guarantee ownership is passing without any liens on the title. If property is being sold, the preferred deed is a warranty deed. Quitclaim deeds are a convenient way to transfer ownership between people who know each other. For example, quitclaim deeds are commonly used to remove a name after a divorce or add a name after a marriage. The person who is transferring, or "quitting," all or part of their ownership share is known as the grantor. If you're receiving the property, you are called the grantee.
The property transfer tax only applies when the property changes hands. The tax is unrelated to the annual real estate property taxes the owner will need to pay based on the value of the home. The transfer tax is due when the grantee records the deed. For most real estate transactions, the tax is based on the sale price of the property or the fair market value. The tax rate varies, based on the county. At the time of publication, transfer tax rates were around 70 cents per $100. If you're claiming an exemption, the corresponding exemption code must be written on the deed.
The specific codes are assigned by the state, but exemptions are available in all states under the same circumstances. The grantee can receive a transfer tax exemption if the property was a gift. To qualify as a gift, no money can be exchanged. An exemption is available if the deed is establishing separate spousal property, confirming community property in a marriage or dividing property in a divorce. When a quitclaim deed is recorded to reflect a name change, there is no required tax because property isn't actually changing hands. If the liens exceed the property value, an exemption is available. Deeds recorded to change how the title is held are also exempt. For instance, a tax wouldn't be assessed if owners record a new deed to change the property from tenants in common to joint tenants with rights of survivorship.
You can find specific codes by visiting the county recorder's office in person or online. Exemption lists and codes are generally available on the county websites. You may need to complete an additional form with your quitclaim deed. For example, in California, a Preliminary Change of Ownership Report must be completed and filed along with the quitclaim deed.
- Clark County Nevada: Recorder -- How to Record a Real Property or Land Document
- Kentucky Legislature: 142.050 Real Estate Transfer Tax Collection on Recording - Exemptions
- State of Arizona Department of Revenue: Deed Exemption Codes
- Viva Escrow: Transfer Tax Exemptions
- Stanislaus County: Transferring Ownership of Real Property