Illinois Real Estate Transfer Tax
The Illinois real estate transfer tax is a tax assessed on transfers of real estate. It applies to transfers of land (including land with buildings, structures, and other improvements) and minerals.
The first step in evaluating Illinois real estate transfer tax liability is to determine if an exemption applies. There are several exemptions (discussed below) that apply in gift and other contexts. These exemptions can save taxes in many common scenarios, including gifts (e.g., a transfer to a family member by quit claim deed) or transfers made at death with an Illinois transfer-on-death instrument. Both of these transfers could be exempt if less than $100.00 is paid for the property.
If an exemption applies, the basis for the exemption and statutory authority should be stated on the deed as part of the Real Estate Transfer Tax Exemption Statement.
If an exemption does not apply, the next step is to determine the amount of the taxes owed. As discussed below, the amount of the tax may differ depending on whether the county or the municipality (or both) where the property is located imposes separate real estate transfer taxes.
Overview of Illinois Real Estate Transfer Tax
Different taxing authorities in Illinois may assess the real estate transfer tax. In addition to the real estate transfer tax imposed by the State of Illinois, Illinois counties and certain Illinois municipalities may also impose their own real estate transfer tax.
State real estate transfer tax are imposed at a rate of $0.50 per $500 of value stated in the Transfer Tax Return. County real estate transfer tax are imposed at a rate of $0.25 per $500 of value stated in the Transfer Tax Return. A transfer that is exempt from state real estate transfer tax is also exempt from county real estate transfer tax.
The municipal real estate transfer tax can vary and, in some cases, be much higher than the state and county real estate transfer tax. In Chicago, for example, the transfer tax rate is $5.25 ($3.75 standard portion and $1.50 Chicago Transit Authority portion) of the value stated in the Transfer Tax Return. Unlike county real estate transfer tax, municipal real estate transfer tax does not track the state-level exemptions. A transfer may be subject to municipal real estate transfer tax even though it is exempt from state and county real estate transfer tax.
All real estate transfer tax will be collected by the Recorder when the deed is recorded. The Recorder is usually the best resource for questions about real estate transfer tax.
Illinois Real Estate Transfer Tax Exemptions that Apply to All Transfers
There are several exemptions from real estate transfer tax that could apply to all real estate transfers:
- The actual consideration (amount paid) for the property is less than $100;
- The deed is being filed to divide real estate that is owned in common and no new owners are being added to the deed;
- The deed confirms, corrects, modifies, or supplements a previously recorded deed and no additional consideration (money) is changing hands;
- The deed is a tax deed created as part of a tax sale for unpaid property taxes;
- The deed is for an exchange of real estate (declaration must still be filed);
- The deed is related to the purchase of a principal residence by a participant in the program authorized by the Home Ownership Made Easy Act (declaration must still be filed); and
- The deed represents a real estate transfer made before January 1, 1968, but recorded after that date.
These exemptions are built into the interview used in our online deed preparation service. The interview will ask you to choose whether any of these exemptions apply. If so, the software will create a deed that includes both the statutory reference and the basis for exemption in the Real Estate Transfer Tax Exemption Statement.
Illinois Real Estate Transfer Tax Exemptions that Apply to Organizations
There are other exemptions that apply only if the grantee or grantor is an organization, depending on the context:
- The deed transfers property to or from a governmental body;
- The deed transfers property to or from any corporation, society, association, foundation, or institution organized and operated exclusively for charitable, religious or educational purposes;
- The deed transfers property from a corporation under a merger, consolidation, or transfer or sale of substantially all of the assets of the corporation under the Federal Internal Revenue Code or Title 11 of the Federal Bankruptcy Act; or
- The deed is from a subsidiary corporation to the parent consideration for no consideration other than the cancellation or surrender of the subsidiary’s stock.
Illinois Real Estate Transfer Tax Exemptions that Apply in the Financing Context
Three other exemptions apply to transfers made in the financing context:
- The deed secures a debt or other obligation;
- The deed releases property that is security for a debt or other obligation; or
- The deed is to a lender pursuant to a mortgage foreclosure proceeding or pursuant to a transfer in lieu of foreclosure.
These exemptions are also built into the interview used in our online deed preparation service. If you indicate that the property qualifies for an exemption, the software will create a deed that includes a Real Estate Transfer Tax Exemption Statement that describes the basis for the exemption and the Illinois statute that authorizes the exemption.