What are doc stamps?
The documentary stamp tax (“doc stamps”) is an excise tax imposed on certain documents executed, delivered, or recorded in Florida, which transfers an interest in Florida real property. The tax is levied at 70 cents for each $100 of consideration for most recorded documents (i.e. deeds) or 35 cents for each $100 of consideration for recording of mortgages. For the purposes of determining whether doc stamps are owed, consideration is defined as: money paid or agreed to be paid, the discharge of an obligation, and the amount of any mortgage, purchase money mortgage lien, or other encumbrance, whether or not the underlying indebtedness is assumed. It is important to note, that if the transfer involves multiple forms of consideration (a mortgage AND there is consideration paid) the amount taxed will be the sum of both.
When are doc stamps due?
The most common example where doc stamps are due is in recording of a deed or mortgage. For example, if you purchase a property valued at $1,000,000.00, upon recording the deed, you will pay $7,000.00 in doc stamps. However, there are several other situations that may trigger the doc stamps tax that you should be aware of.
Common real property transfer scenarios involving doc stamps:
1. Transfer of property from individual to entity
If you want to transfer a property from your individual capacity to an entity, doc stamps are triggered if there is a mortgage on the property and/or if there is consideration for the transaction.
2. Transfer of property from entity to individual
Same analysis as #1. If you transfer a property out of your LLC to an individual, doc stamps are owed if there is a mortgage on the property and/or consideration for the transaction.
3. Transfer to add/remove an individual
If you are conveying property to add or remove an individual to title with an outstanding mortgage, you will be subject to doc stamps based on the percentage of the ownership interest to be added or removed. If there is no mortgage or consideration in the transfer, then no doc stamps are owed.
4. Transfer into trust
If you convey property into a trust, the transaction is taxable to the extent the deed transfers beneficial ownership of the real property and to the extent there is consideration for the transfer. For example, if you deed a property to your trust and you are the sole beneficiary of the trust, then no doc stamps are due, regardless of whether the property is encumbered by a mortgage.
However, if you transfer property to a trust where other persons are also beneficiaries, then the transaction is subject to doc stamps if there is any consideration. In the above scenario, if the transfer involves a property encumbered by a mortgage or sale proceeds, then you will have to pay doc stamps for the amount of the unpaid mortgage, the consideration paid, or the sum of both.
5. Transfer out of trust
If a property is conveyed out of a trust to the sole beneficiary of the trust immediately before the conveyance, the transaction will not be subject to doc stamps, regardless of whether there is a mortgage on the property.
However, if a property is conveyed to you and there are other beneficiaries of the trust, doc stamps apply to the extent the transfer gives you an ownership interest in the real property greater than your percentage beneficial ownership interest in the trust immediately before the transfer, based on consideration for the transfer of the additional interest. For example, you and your wife are beneficiaries of a trust and you own 60% interest and your wife owns 40% interest in the trust, the transfer of a property to you alone worth $1,000,000.00, encumbered by a $500,000.00 mortgage, then the doc stamp tax would be taxed on a consideration of $200,000.00 (or 40% of the mortgage) and total $1,400.00.
6. Transfer of property in a divorce
If spouses transfer their marital home pursuant to an action for dissolution of marriage, doc stamps are not imposed. The law is structured to allow for a refund for paid doc stamps in cases where the transfer occurred 1 year prior to the dissolution of marriage.
7. Transfer of homestead property between spouses
A transfer of homestead property or any interest in homestead property between spouses is not subject to doc stamps if the only consideration for the transfer is the amount of the mortgage or other lien encumbering the property at the time of transfer.
8. Gifting unencumbered real property
If a property is gifted to another person/entity AND the property is not encumbered then there will not be any doc stamps imposed.
As you can imagine, there are numerous situations that can arise in which Florida’s doc stamps tax applies. As such, it is always recommend that you speak with your real estate attorney prior to making any transfer of real property.
Sincerely,
Conrado Gomez, Jr., Esq. cgomez@berlinpatten.com
Berlin Patten Ebling
Disclaimer
***Be advised that this blog provides general information about the imposition of documentary stamps in broad situations. For a determination of whether documentary stamps are owed in a situation specific to you please contact your real estate attorney or Certified Public Account for further information.***
