Learn about transfer tax

Transfer tax basis

The authority to collect transfer taxes and list of documentary transfer tax exemptions are codified in Article 12C of the San Francisco Business and Tax Regulations Code.

Here is a breakdown of the key points for transfer tax basis for common real property transfers:

• Standard case: generally, the transfer tax is based on the price you pay for the property (purchase price).
• No purchase price: generally, if there is no purchase price, like in a property swap, the tax is based on the property's fair market value.
• Legal entities: generally, when a company (e.g., corporation, partnership) holding real estate is sold, the tax is based on the property's fair market value, not the company's sale price. 
• Long term leases: generally, for leases 35 years or over, the tax is based on the present value of the leasehold interest, calculated using the lease's rent.
• Transferable development rights (TDRs): generally, when development rights are sold, the tax is based on the purchase price per unit multiplied by the number of units sold.

Common transfers exempted from transfer tax

Generally, you do not need to pay transfer taxes on these common types of transfers:

• Between a married couple
• Between domestic partners
• Gifts
• Inheritance
• Transfers between an individual and their own trust
• Transfers between an individual and their own legal entity, like a limited liability company, limited partnership, or corporation
• Adding or removing a co-signor solely for refinancing purposes

File a Transfer Tax Affidavit and Preliminary Change in Ownership form to claim the exemption.

You may also be eligible for the seismic and solar transfer tax exemption.

Transfer tax affidavit

The affidavit helps our office determine if a transfer tax is due. You still need to submit a Transfer Tax Affidavit even if no transfer tax is due. We may ask you for more information after processing the affidavit.

Here is a list of recorded documents that generally require the affidavit. 

• Deed, leases, easements, an assignment of leases or subleases, TDR transfers, unrecorded legal entity transactions

Transferring to your own trust - no tax if sole beneficiary

Generally, there is no transfer tax is due when you transfer title to your own trust. The interest must remain the same before and after the transfer. 

To claim this exemption, complete the following forms:

• Preliminary Change in Ownership: Answer Part 1(L).
• Transfer Tax Affidavit: Answer question #7 stating that the transfer is a proportional interest transfer to a trust.

Trust documentation requirements:

• Revocable trust with grantor's name: no additional documents are required if the trust is a revocable trust and includes your name.
• Revocable trust without grantor's name: you'll need proof that the trust is revocable and identifies you as the creator of the trust. Supporting documents may include the following:
  • Copy of trust document, trust declaration, or certification of trust 
• Irrevocable trust: you must provide documentation that you will be the sole current beneficiary under the trust. Supporting document may include:
  • A copy of the trust or a certification of trust

Proportional ownership transfers

No transfer tax is due if the legal entity ownership percentages of the property remain the same before and after the transfer. Example: LLC transfers ownership to another LLC, where both LLCs have the same members with identical ownership proportions. 

To claim the exemption, you need to complete the following forms:

1. Preliminary Change in Ownership: Answer Part 1(N) indicating that the transfer is a proportional interest transfer.
2. Transfer Tax Affidavit: Be sure to answer question #7 indicating that the transfer is a proportional interest transfer. 

Verification Documents

• For our office to approve the exemption, you will need to provide copies of the legal documents for both entities: 
  • LLC Operating Agreement, or Partnership Agreement.
  • Any amendments made to these agreements up to the transfer date. 

Transfer tax and ownership changes

Transfer taxes are due when the proportional ownership interests in a property change after the transfer. Here is an example: Party A and B (equal partners) transfer their property to an LLC owned by Party B. 

In this scenario, Party B's ownership goes from 50% to 100%. This change in ownership triggers transfer tax of 100% of the LLC. An LLC is a separate legal entity from the original ownership structure. Absent any exemptions, the transfer tax will be based on the full fair market value of the property, not the change in Party B's ownership.

Adding/Removing co-signer when you refinance your loan

Generally, no transfer tax is due when you add or remove a co-signer on a title for financing purposes, as long as no payment is made for the change. If someone pays to be added to the title (even as a co-signer), the transfer tax would be based on the amount paid.

To qualify for this exemption, you need to document the transaction by filling out the following forms: 

• Preliminary Change of Ownership: answer Part 1(J)
• Transfer Tax Affidavit: answer question #8, indicating that you are adding or releasing a co-signer for no consideration. 

Adding a child to title

There are two main scenarios to consider:

• Consideration paid (purchase): if your child pays you something to be added to the title, a transfer tax will be due. The tax amount is based on the consideration paid by your child.
• Gift: if adding your child to the title is a gift, then there is generally no transfer tax due in San Francisco. 
  • Preliminary Change in Ownership form: be sure to mark the "gift" box in part 2. 
  • Transfer Tax Affidavit: mark the "gift" box in question #8 and completely fill out and sign the Transfer Tax Affidavit form.

Note: our office may send deeds and tax affidavits for claimed gift exemptions to the Internal Revenue Service. While San Francisco does not impose transfer taxes for gifts, there might be federal tax implications to consider. 

Our staff may not give you financial or legal advice. Reach out to the Internal Revenue Service or your financial advisor for questions on gift tax. 

Transferring your property to your spouse

Frequently asked question: I want to transfer my property to my spouse. Is there any transfer tax for a deed between a married couple or domestic partners?

Answer: Generally there is no transfer tax due on transfers between a married couple or between domestic partners who are registered with the City, the State, or other jurisdictions. You must fill out the Preliminary Change of Ownership form (Part 1 (a)) and Transfer Tax Affidavit (including question #9) indicating that it is a transfer between a married couple or domestic partners.

Inheritance

Frequently asked question: Is there any transfer tax for a deed where the nature of the transfer is an inheritance?

Answer: There generally is no transfer tax for property inherited by will or through a trust as long as nobody paid anything in exchange for the property. Be sure you fill out the Preliminary Change of Ownership form and Transfer Tax Affidavit (including question #8) indicating that it is an inheritance and provide the date of death.

Please note that the Assessor-Recorder may transmit deeds and tax affidavits for all claimed inheritance exemptions to the Internal Revenue Service. Our staff may not give you financial or legal advice. Questions regarding taxes on inheritances should be directed to the Internal Revenue Service or your financial advisor.