Real estate transfer tax in Kentucky: rate, payer, exemptions

What the statute taxes

KRS 142.050 defines a “deed” broadly: any document, other than a will, lease or easement, that conveys, transfers or assigns real property in Kentucky or an interest in it. The tax is based on “value”:

• In a sale, value is “the full actual consideration,” including the amount of any liens on the property. A mortgage the buyer takes over counts toward the value.
• In a gift, or a deed with nominal or no stated consideration, value is the estimated price the property would bring in an open-market sale between a willing buyer and a willing seller.

The tax is collected once per transaction, in the county where the deed must be recorded.

How the rate works

The rate is $0.50 per $500, and any fraction of $500 counts as a full unit. The tax therefore rises in steps of 50 cents.

Calculated from KRS 142.050(2). The statute states no minimum or maximum.

Who pays, and who collects

By law, the seller. Subsection (2) imposes the tax “upon the grantor named in the deed.” The sources I read do not say whether a purchase contract can move the cost to the buyer, so check your contract. Our closing costs guide shows the other lines at closing.

The county clerk collects. The clerk computes the tax from the value stated in the deed and collects it “as a prerequisite to acceptance of the deed for recordation.” The clerk keeps a 5% fee and sends the rest to the county treasurer every three months, for the county general fund.

The deed must state the price. A Kentucky deed must contain the full consideration and a sworn, notarized certificate, signed by the grantor and the grantee or their agents, that it is the full price paid (KRS 382.135). For a gift, the certificate states that the transfer is a gift and gives the estimated fair cash value. A county clerk may not accept a deed that lacks these items.

Exemptions

KRS 142.050(7) lists transfers the tax does not apply to. The ones that matter most to homeowners:

• Transfers between spouses, or between former spouses as part of a divorce proceeding.
• Transfers between parent and child, or grandparent and grandchild, for nominal consideration.
• Transfers under a foreclosure proceeding, or a voluntary surrender under a mortgage in lieu of foreclosure.
• Transfers solely to provide or release security for a debt (a mortgage or its release).
• Deeds that confirm or correct a deed already recorded.
• Transfers on sale for delinquent taxes, and on partition.
• Gifts or nominal-consideration deeds to or from the United States, the state, a city or a county.
• Transfers between a trustee and a successor trustee, and between a limited liability company and its members.

Subsection (8) also exempts some transfers into and out of a trust, for example when the grantor is the sole beneficiary. Whether your deed qualifies depends on its exact facts; ask the person preparing it. See whether you need an attorney.

Other government charges on a deed

The transfer tax is not the only charge. KRS 142.010 adds a $4 state tax on each conveyance of real property. KRS 64.012 sets the clerk’s fee for recording a deed at $33 for up to five pages, then $3 for each extra page.

I found no city or county transfer tax in the statutes I read. I could not open the Jefferson County Clerk’s pages for this article, so confirm with the clerk before you close in Louisville. Our page on buying a home in Louisville applies these rules to the city.