How do you calculate Florida Intangible Tax and Transfer Tax on a mortgage?

How do you calculate Florida Intangible Tax and Transfer Tax when purchasing a home?  Do you know what costs are associated on the transfer of real property and how to calculate Florida Intangible Tax?

When purchasing a home, you never want to be surprised with out-of-pocket expenses! Even if you are qualified to purchase a home with a USDA No Down Payment Loan, you still have to be prepared for other costs to complete the transaction which include Florida Intangible Tax and Transfer Tax, i.e., Documentary Stamps on the Deed.

In today’s video, I will go over the details and explain how these costs are calculated so you can be prepared prior to closing!

If you have not yet done so, remember tod click here and access our FREE USDA Resources, including our USDA Blueprint for Success. They are valuable tools to walk you through several USDA processes step by step.

Florida Documentary Stamp Tax

The State of Florida can assess certain taxes on both the transfer of real property and mortgages. This boils down to the fact that a Florida homebuyer must be prepared pay additional taxes when purchasing a home.

A number of these taxes stem from Florida’s documentary stamp tax. Below is what the Florida Department of Revenue states the documentary stamp tax is:

“Documentary stamp tax is an excise tax imposed on certain documents executed, delivered, or recorded in Florida. The most common examples are:

• Documents that transfer an interest in Florida real property, such as deeds; and
• Mortgages and written obligations to pay money, such as promissory notes.

Tax is paid to the Clerk of Court when the document is recorded. When a taxable document is not recorded, the tax must be paid directly to the Florida Department of Revenue.” (Section 201, Florida Statutes)

Deeds and Other Documents that Transfer an Interest in Florida Real Property

“Deeds and other documents that transfer an interest in Florida real property are subject to documentary stamp tax. Regardless of where the deed or other document is signed and delivered, documentary stamp tax is due. The amount of tax due is computed based on the consideration for the transfer. All parties to the document are liable for the tax regardless of which party agrees to pay the tax. If a party is exempt, the tax must be paid by a non-exempt party.” (Reference: Section 201.02(1)(a), Florida Statutes)

So what does all this mean? Basically, Florida taxes are administered to cover the variety of recorded documentation needed when purchasing a home.

Calculating the Florida Transfer Tax

Section 201.02(1)(a) of the Florida Statutes states the following:

“On deeds, instruments, or writings whereby any lands, tenements, or other real property, or any interest therein, shall be granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser or any other person by his or her direction, on each $100 of the consideration therefor the tax shall be 70 cents.”

However, the one exception for this lies in Miami-Dade County where the tax rate is “60 cents on each $100 or portion thereof, of the total consideration. Miami-Dade County also has a surtax of 45 cents on each $100 or portion thereof, of the total consideration. The surtax is not due on a document that transfers only a single-family dwelling.”

Furthermore, a promissory note is the document that details the amount owed, interest rate, and the terms of your promise to repay. Florida Statue § 201.08(1)(b)) states the following regarding tax rates on promissory notes:

“On promissory notes, nonnegotiable notes, written obligations to pay money, or assignments of salaries, wages, or other compensation made, executed, delivered, sold, transferred, or assigned in the state, and for each renewal of the same, the tax shall be 35 cents on each $100 or fraction thereof of the indebtedness or obligation evidenced thereby. The tax on any document described in this paragraph 1may not exceed $2,450.”

Florida Intangible Tax

Lastly, there is a one-time nonrecurring tax commonly referred to as the Florida Intangible Tax.

Courtesy of the Florida Department of Revenue: “Chapter 199, Florida Statutes (F.S.), imposes nonrecurring intangible tax on obligations to pay money to the extent the obligation is secured by a mortgage or lien on Florida real property. The tax is due even if the mortgage or lien is not recorded or filed in Florida. In no event will the tax be calculated on an amount greater than the fair market value of the collateralized Florida real property.”

Calculating the Florida Intangible Tax

Florida Intangible Tax is calculated at 2 mills per each dollar of the just value of the note ($.002) secured by the mortgage. (§199.133, Fla. Stat.)

Please note that intangible tax on a home equity line of credit will be calculated on the full line amount, not just the amount advanced at closing.

Example Calculation

If you are overwhelmed at this point, don’t worry. I’ll go over an example calculation and it will become clear how these taxes are applied. Here’s the situation:

Brenda, the seller, and Steve, the buyer, have agreed to the purchase and sale of a property located in Highlands County for $125,000.  After Steve’s down payment of $25,000, he obtained a promissory note for $100,000 secured by a mortgage.

Now, because the sales price is $125,000, the Florida Transfer Tax calculation on the deed would be:

• $125,000 X .0070 = $875.00 (1,250 taxable units X $.70)

Further, because there is a promissory note for $100,000 the following Transfer Tax would also be calculated:

• $100,000 X .0035 = $350 (Promissory Note)

Lastly, because of the Florida Intangible Tax, the following is also calculated:

• $100,000 X .0020 = $200 (Intangible Tax)

In total, this amounts to a potential Florida tax charge of $1,425. Now, you can see how these costs can sneak up on you. Just remember, the terms of the sales contract will usually determine who is responsible for each specific cost.

Buyer Closing Costs in Florida

A buyer’s closing costs in Florida may vary from transaction to transaction. Please use us as your resource for any further questions. please please call (800) 806-9836 Ext. 280 or email SeanS@MPLX.org to discuss your scenario. We are known for returning calls, replying to emails, and responding to your messages.

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