How To: Calculate the Savings from Reduced Stamp Duty and Transfer Tax

Among the recently announced reductions in various taxes are stamp duty and transfer tax. Let’s look at what those reductions could mean in dollar value when purchasing or selling property.

As of April 1, 2019:

  • Stamp duty, which was previously assessed ad valorem (as a percentage) at a rate of 2% for the buyer and 2% for the seller (a total of 4% per transaction) will now be reduced to a flat fee of $5,000.
  • Transfer tax, which is borne by the seller, was previously assessed at rate of 5% has now been reduced to 2%.

SAVINGS IN DOLLARS

For purposes of illustration, let’s look at a property to be sold/bought for $10 million.  Using the calculator:

As you can see, the seller will save the most in the transaction, as a result of the changes to these fees. In this scenario about $495,000 less will be paid by the seller in these two fees. The buyer will save the difference in the stamp duty of $200,000 assuming the new $5,000 fee is borne by the seller (this information was not available at the time of writing).

The tables below present calculations for the savings seen for the purchase of a range of properties – $5 million to $50 million.

Reduction in Stamp Duty and Transfer Tax
Reduction in Stamp Duty and Transfer Tax (cont’d)

The larger the property value, the greater the reduction in fees, particularly for the sellers of property, which can be calculated from the formula:

SAVINGS IN STAMP DUTY AND TRANSFER TAX = PROPERTY_PRICE*(.07) – $5000

It is important to note that Stamp Duty and Transfer Tax are not the only fees to be considered in the purchase of property. Other fees include:

  • Real Estate Agent Fees (3-5% + GCT each)
  • Attorney’s Fees (1.5% – 3% + GCT each)
  • Preparation of Sales Agreement ( approximately 0.2%)
  • Registration Fee (0.25% each)

Have a property in mind and want to see the savings? To access a calculator that includes estimated stamp duty and transfer tax fees click here.

Guest Post:  Gillian Jackson, Researcher and Analyst (Twitter: @MsGillyJ)