Live (Reside) Free or Die –  the New Hampshire Transfer Tax

New Hampshire prides itself on its independent spirit, and along with this, an affinity toward lower taxes. It therefore seems ironic that New Hampshire holds the unfortunate position of having the highest real estate transfer tax of any state in the nation.  Apparently someone in the state revenue department forgot about this state ideal!

There is a transfer tax assessed on the sale or purchase of any interest in real estate in New Hampshire. This tax is assessed against the buyer and the seller on all transactions of any interest in land unless that transaction is specifically excluded.

How much is New Hampshire’s lofty transfer tax? Most people perceive it as approximately ¾ of 1 percent ($7.50 cents per $1000) because that’s what they paid at the time of the transaction. The “state tax/stamps” line item on the closing statement would be calculated as 0.75 percent of the sales price. However, one thing most people don’t know is that both buyer and the seller pay 0.75 percent, making the actual tax 1.5 percent ($15.00 per $1000) of the actual sales price. You’ll see it as a line item on your closing documents, or at least you should.

Example:

A home sells for $275,000.

Transfer tax paid by buyer (.75%): $2062

Transfer tax paid by seller (.75%):  $2062

Total Transfer tax (1.5%): $4125 

 But there are other things to consider besides the tax itself. As a Market Street Settlement Group, Inc. article explains, “Exceptions to this law include corrective documents, mortgages, discharges, inheritance through probates or acquisitions by joint tenancy, and sales or purchases of interests in land by national, state or local governments, in which case the governmental unit would not pay any portion of the tax. [An individual buying from or selling to that governmental agency would pay their portion, though.] Conveyances made pursuant to a divorce decree are also excluded, as are ‘true gifts’ or non-contractual transfers. However, there is a strong presumption against non-contractual transfers and any evidence of economic impact to either party resulting from the transfer may imply a taxable event.”

“It is presumed that all transfers [whether warranty, quitclaim or fiduciary deed] are taxable and this includes many transactions customarily misunderstood to be exempt. Transfers between family members, including husbands and wives are not considered gifts or non-contractual if there is any suggestion of economic ‘impact’ to the parties. For example, a conveyance between family members believed to be a gift by the parties to the transaction and exempt from the tax may be considered a contractual transfer subject to the tax if either party refinances the property contemporaneous to the transfer. The (Department of Revenue Administration) imputes the new mortgage to be evidence of consideration for the transaction despite the absence of any actual cash changing hands.”

“Furthermore, transfers of interest between persons and business entities are taxable whether or not the persons or entities are directly or indirectly controlled by the other person or entity in the transaction. Transfers between shareholder and corporation, partner and partnership, member and Limited Liability Company, and individual and business entity, are all taxable transfers under the law. When there is no stated actual price, the value is presumed to be the fair market value of the property at the time of transfer. Care must be taken to assess the tax impact whenever a transfer of property is proposed as a part of any transaction, refinance, or restructuring of business entities.”

So be aware of this tax when transferring property and keep in mind that all transfers are assumed to be taxable. The NH Department of Revenue Administration actively monitors the transfer of New Hampshire real estate and has authority for 3 years to question the amount paid, require proof for any exemption claims, and assess penalties and interest for failures to pay appropriate tax.

 In other words – you can’t escape the taxman – and he’s made of Granite around here. If you have any further questions about the transfer tax, feel free to contact the Department of Revenue Administration at 603.271.3701.