Alabama deed tax and mortgage tax: rates and who pays

What is the Alabama deed tax?

The deed tax is a “privilege or license tax” paid when a deed is recorded. Under § 40-22-1(c), an instrument conveying property worth $500 or less pays $0.50. Above that, it pays $0.50 for each $500 or fraction thereof. That works out to $1 per $1,000 of price, or 0.1%.

The deed cannot be recorded until the tax is paid (§ 40-22-1(a)). The recording office also needs proof of the actual price. The person recording must give the probate judge the real purchase price or, if there was no sale, the actual value, using a form from the Alabama Department of Revenue. The statute says no further documents are required, only the signed attestation (§ 40-22-1(c)).

If no proof is given, the judge of probate bases the tax on the most recent assessment and adds a penalty. Someone who intentionally withholds proof after the probate office asks for it, or who gives false proof, owes $100 or 25% of the tax due, whichever is greater (§ 40-22-1(d), (h)). A good-faith attestation is not treated as false proof.

Two-thirds of the deed tax goes to the State Treasury and one-third to the county (§ 40-22-1(g)).

What is the Alabama mortgage tax?

A mortgage or deed of trust that secures a loan on Alabama property pays $0.15 for each $100 of initial debt, or fraction thereof (§ 40-22-2(1)a). The same tax applies to an extension or renewal, on the amount extended (§ 40-22-2(6)). A new loan secured by a new mortgage pays on its own initial debt. As with the deed tax, the instrument is not recorded until the tax is paid.

Two-thirds of this tax goes to the State and one-third to the county (§ 40-22-2(7)).

When a deed says part of the price is unpaid, the unpaid part is treated as a mortgage and taxed as one, unless a mortgage securing it has already paid the tax (§ 40-22-2(3)).

Who pays by law?

Neither statute says whether the buyer or the seller pays. They only say the tax must be paid before the instrument is recorded. In practice, the sales contract and the closing statement assign it, and your Closing Disclosure shows each charge. See closing costs in Alabama.

Which transfers are exempt?

Under § 40-22-1(b), no deed tax is required for:

• transfers of mortgages on which the mortgage tax was already paid;
• deeds or instruments executed for a nominal consideration to perfect title;
• re-recorded corrected instruments, and instruments executed before October 1, 1923.

The deed tax is also reduced where a mortgage on which the mortgage tax was paid stays on the property. Only the value in excess of that mortgage is taxed (§ 40-22-1(c)).

County and city taxes

The statutes read for this article set no separate city or county deed tax. Jefferson County’s schedule lists only the state-level rates, and shows no city or county transfer tax. The county does charge recording fees and one extra Jefferson County fee, shown below.

Example: a $250,000 sale in Birmingham

This is an illustration, not a quote. It assumes a $250,000 price, a $200,000 new mortgage, a 3-page deed and a 15-page mortgage. The page counts are assumed.

Jefferson County’s schedule also lists a $1 charge for each grantor or grantee beyond two. The $11 fee comes from the statute, not from the court’s recording-costs page, so confirm it with the Probate Court. The recording office is the Probate Court of Jefferson County.

For the other costs at closing, see closing costs explained. For the Birmingham market, see the Birmingham guide.