Buying or selling in Chicago and confused by transfer taxes? You are not alone. The terms, stamps, and who pays what can feel unclear when you first look at a closing statement. This guide walks you through how Chicago transfer taxes work, who typically pays them, and a simple method to estimate what you should budget. Let’s dive in.
What is a transfer tax?
Transfer taxes are charges tied to transferring real estate from one owner to another. In Chicago, three layers often apply, and each one is set by a different government. You will usually see a city tax, a county stamp, and a state documentary tax on a sale.
City of Chicago tax
The City of Chicago imposes a municipal transfer tax on property located within city limits. The tax is collected when the transfer is recorded. Title and closing agents usually collect the funds at closing and remit them to the City.
Cook County stamp
Cook County collects a documentary or transfer tax when deeds and certain conveyances are recorded. This often appears on your closing statement as county documentary stamps or a transfer stamp charge.
State of Illinois documentary tax
Illinois also imposes a documentary or transfer tax on conveyances statewide. It is typically collected at the same time as the county recording and appears on the instruments that record the deed.
Note: Transfer taxes are different from title insurance, escrow fees, and recording fees. Those are separate line items on your settlement statement.
Who pays in Chicago?
Allocation is negotiable and should be spelled out in your purchase contract. That said, local custom in the city sets expectations for many deals.
Local custom
- Sellers commonly pay the City of Chicago transfer tax.
- Sellers also commonly pay the Cook County documentary or transfer stamp on the deed.
- Buyers commonly pay charges tied to their new mortgage, such as mortgage recording fees and lender document recording.
These are typical patterns, not legal rules. Your contract controls who pays what.
Market conditions and contracts
In a strong seller’s market, sellers sometimes push more costs to buyers. In a buyer’s market, sellers may absorb more of the transfer taxes. Your agent, the title company, and your attorney will guide you on what is customary for your property type and neighborhood and will reflect the agreed allocation on the closing statement.
How much to budget
Each jurisdiction calculates its tax differently. Some are a percentage of the sale price. Others charge a set amount per dollar increment, such as per $500 of consideration, often rounded up to the next increment.
Step 1: Confirm jurisdictions
- Is the property inside the City of Chicago? If yes, the city tax applies.
- Is the property being recorded in Cook County? If yes, county stamps apply.
- Illinois documentary tax generally applies statewide to recorded conveyances.
Step 2: Get current rates
- Check the City of Chicago Department of Finance for current municipal rates and forms.
- Check the Cook County Recorder or Clerk for county documentary stamp rules and recording fee schedules.
- Confirm the Illinois documentary tax rate and whether it is per increment or a percentage.
- Ask about rounding rules if the rate is per increment. Many jurisdictions round up to the next $500 or $1,000.
Step 3: Do the math
- For a percentage-based tax: Tax = Sale Price × Tax Rate.
- For a per-increment tax: Number of Increments = round up (Sale Price ÷ Increment Amount), then Tax = Number of Increments × Charge per Increment.
- Total Transfer Taxes = City amount + County amount + State amount.
Step 4: Add related costs
- Recording fees for the deed and any mortgage.
- Title company document handling or processing fees.
- Any special city or county fees tied to the instrument type.
Step 5: Confirm with your title team
Your title or closing agent will prepare an itemized Closing Disclosure or settlement statement. It shows who pays each tax, the exact amounts, and all related fees. Use that document as your final, binding estimate.
Special cases and exemptions
Some transactions qualify for exemptions from one or more transfer taxes. Documentation is usually required, and rules can vary, so confirm early in the process.
Typical exemptions include:
- Transfers between spouses or incident to divorce.
- Transfers by reason of death, such as probate or inheritance.
- Transfers involving governmental entities, nonprofits, or housing authorities.
- Foreclosure or tax deed situations in some cases.
Other considerations:
- Transfers of beneficial interests, land trust assignments, or leasehold assignments can trigger taxes depending on how the instrument is structured. Verify treatment with the recorder and your title counsel.
- Commercial transfers or very large transactions may face different or tiered municipal rates. Confirm current ordinances.
- Rounding rules can increase the effective rate slightly on per-increment taxes when the price is not a perfect multiple of the increment.
Avoid surprises at closing
Use this quick checklist to keep your estimate accurate:
- Confirm where the property sits and which jurisdictions apply.
- Ask the title company for a preliminary closing statement for buyer and seller that itemizes city tax, county tax, state tax, recording fees, and any mortgage recording fees.
- Clarify in the contract who pays each transfer tax and who pays deed and mortgage recording.
- Check whether an exemption applies and gather required forms early.
- Reconfirm rates and rounding rules shortly before closing.
Example: $400,000 method
Here is how the math works, using placeholder rates only. Replace the variables with current official rates when you estimate.
- Sale Price: $400,000.
- City tax: If the city tax is A percent, City Tax = 400,000 × A.
- County stamp: If the county charges B per $500, County Tax = round up(400,000 ÷ 500) × B.
- State tax: If the state charges C per $500, State Tax = round up(400,000 ÷ 500) × C. If percentage-based, use the percentage formula.
- Total Transfer Taxes = City Tax + County Tax + State Tax. Then add deed and mortgage recording fees to estimate total closing costs tied to transfer and recording.
Whether you are selling a River North condo or buying in Lincoln Park, a clear plan saves time and money. If you want a precise estimate for your address and price point, reach out for a quick review of your contract, taxes, and title charges. Connect with Nickola Wells to Request a Free Home Valuation or Schedule a Consultation.
FAQs
Who pays the City of Chicago transfer tax on a typical home sale?
- Local custom often has the seller paying the city transfer tax, but the purchase contract controls, and allocation is negotiable.
Who pays the Cook County documentary stamp in Chicago deals?
- It is common for the seller to pay the county documentary or transfer stamp, although parties can negotiate a different allocation.
Do buyers pay mortgage recording fees in Chicago?
- Yes, buyers commonly pay fees tied to their new mortgage, including mortgage recording and related charges, while sellers typically cover deed-related transfer taxes.
How do I estimate transfer taxes for my home price?
- Identify which jurisdictions apply, pull current city, county, and state rates, apply the percentage or per-increment formulas, then add recording fees and confirm with your title company.
Are there exemptions from Chicago-area transfer taxes?
- Yes, certain transfers such as between spouses, incident to divorce, by reason of death, or involving government or nonprofit entities may qualify. Confirm documentation requirements early.
Does market condition affect who pays transfer taxes?
- Yes, in a seller’s market buyers may take on more costs, and in a buyer’s market sellers may absorb more. Your agent can advise on current norms and negotiate accordingly.
