Tax policies differ from one state to the next. States levy taxes to help fund a variety of state government services. Tax collections account for approximately 40% of total state revenue.
They derive the rest from non-tax sources, such as intergovernmental aid (e.g., federal funds) and lottery winnings.
Personal income tax, general sales tax, excise (or special sales) taxes, and corporate income tax are the most common types of taxes levied by state governments.
The intangibles tax is a local tax, not to be confused with the state income tax, which is used to fund state government, that is levied on gross earnings from intangible property such as savings accounts and stocks.
- bonds
- receivables (accounts receivable)
- Mortgages
Stay with us as we explain how intangible tax works in Georgia and Florida and how to implement it in your mortgages and real estate businesses.
Intangible Tax in Georgia
They impose the State of Georgia Intangibles Tax at $1.50 per five hundred ($3.00 per thousand) based upon the amount of loan. Example: A property financed for $550,000.00 would incur a $1,650.00 State of Georgia Intangibles Tax.
However, you must pay the tax within 90 days from the date of the instrument. At $1.50 per five hundred ($3.00 per thousand) based upon the amount of loan. Example: A property financed for $550,000.00 would incur a $1,650.00 State of Georgia Intangibles Tax.
- You must pay the tax within 90 days from the date of the instrument.
- See below for penalty information.
- The tax applies to long-term notes.
Intangibles Tax Exemptions
Georgia law contains many exemptions to the State Intangibles Tax, including transactions involving the following:
Short Term Note Exemption
Short-term notes secured by real estate are exempt from the State of Georgia Intangibles Tax. Under Georgia law, a “Short-Term Note” is a note having a maturity of three years or less.
Refinance Exemption
The Georgia intangibles tax is exempt on refinance transactions up to the amount of the unpaid balance on the original note. The borrower and lender must remain unchanged from the original loan.
Non Note Exemption
A security instrument is exempt from the State of Georgia Intangibles Tax when the instrument does not secure a note. Common examples include guarantees, performance bonds, performance agreements, indemnity agreements, divorce decrees, and letters of credit.
Credit Union Exemption
A security instrument is exempt from the State of Georgia Intangibles Tax when the lender is a federally or Georgia charted credit union or church.
Other Exemptions
Other exemptions from the intangibles tax include the following situations:
- Where the United States is a party, including various other government entities.
- We have already paid substitutions of real estates for which the tax.
- Transfers and assignments where the intangibles tax has already been paid.
Intangibles Tax Penalties
You must pay the State of Georgia Intangibles Tax within 90 days from the date of the instrument. Failing to pay the Georgia Intangibles Tax bars foreclosure of the property.
Availability of Cure:
They may lift the bar under certain conditions upon payment of the tax plus interest plus penalties in the amount of 50% of the tax due.
What Is Intangible Personal Property?
Intangible personal property is a valuable item that no one can touch or hold physically. Individuals and corporations can own these assets. Intangible personal property includes digital, copyrights, patents, and investments, as well as image, social, and reputational capital.
Also known as intangible assets, intangible personal property is the polar opposite of tangible personal property, which one can handle and have monetary worth, such as equipment, jewelry, and electronics.
Intangible Tax on a Mortgage
It is safe to say that states require funds to function, and even “low-tax” states will find creative ways to get taxpayer funds into their coffers. That is the case in Florida and Georgia, both of which levy an intangible tax on mortgages. They calculate this tax on the loan amount of a mortgage which is like the real estate transfer tax levied in other states.
Until 2007, Florida imposed an intangible tax, also known as a Florida stamp tax, on a wide range of investments. Because affected taxpayers held stocks, bonds, and other financial instruments, they commonly referred it to as “the wealth tax.”
They repealed that portion of the intangible tax that year, but the one-time intangible tax on mortgages is still in effect.
In 2018, the rate was 0.2 percent, or $2 per $1,000 of the mortgage amount. The tax payment is due within 30 days of the instrument’s recording and is made payable to the circuit court clerk in the county in which it was recorded.
Within 90 days following the instrument’s recording, anyone taking out a mortgage loan in Georgia must pay a one-time intangible Georgia mortgage tax on the loan amount.. They currently impose the intangible tax at a rate of $1.50 per $500 or $3 per $1,000 of the loan amount.
That means a person financing a $550,000 property pays $1,650 in intangible tax. They limit the intangible mortgage tax in Georgia to $25,000, but that would require a mortgage totaling more than $8 million.
Intangible Tax in Florida
Taxation of intangible personal property in Florida began in 1924 when local municipalities began levying taxes on it. However, in 1972, the state took over the administration of the tax.
Every year, Florida taxpayers were required to calculate the market value of items such as certificates of deposit, trusts, retirement plans, franchises, and real estate mortgage investment conduits and then pay a tax based on that value.
When the tax was repealed, it had fallen to 50 cents per $1,000 of valuation, a reduction from the $1 per $1,000 taxpayers had previously paid. Single filers could claim an exemption of up to $250,000, while married filers could claim an exemption of up to $500,000 if they filed jointly.
One of the most serious issues with the intangible tax was that residents of the state could easily avoid paying it. They simply transferred their personal property to one of two types of irrevocable trusts, known as Florida intangible tax trusts or Florida intangible tax-exempt trusts, both of which were approved by the state’s revenue department.
Furthermore, because they set the exemption rates so high, only Florida’s wealthiest residents were required to pay the tax each year, making collections a negligible portion of the state’s overall tax base.
Although there is no intangible tax that Florida residents must pay, there is a property tax that they must pay on their homes and on any real estate they own. Property taxes in Florida average 1.1 percent of a home’s total value, which is slightly lower than the national average.
The rate of nonrecurring intangible taxation is 2 mills. They calculate the tax by multiplying the obligation secured by Florida real estate by 0.002.
Intangible Tax on Real Estate
Because Florida does not levy a state income tax on individuals, one way the state generates revenue is through imposing documentary stamps and non-recurring intangible personal property taxes on Florida real estate loan transactions.
On the other hand, they can structure some real estate loan transactions in such a way that they reduce or eliminate the documentary stamps and intangible taxes.
Loans secured by real estate in Florida are generally taxable. They levy documentary stamp taxes on notes or other promises to pay at a rate of $.35 for every $100 (or fraction) of debt secured by a mortgage on Florida’s real property.
Meanwhile, they levy non-recurring intangible personal property taxes at a rate of $.002 times the amount of debt secured by a mortgage on Florida real estate.
Definitions
Any conveyance, grant, quitclaim, assignment, or transfer of real property for valuable consideration is a sale subject to real estate excise tax. Meanwhile, they exclude transfers by gift, inheritance, a mortgage to secure a debt, and other specific cases are from this definition.
They define a seller as a corporation, association, trust, estate, firm, or another group of individuals acting as a unit, as well as an individual selling a property.
They define the selling price as both the total amount paid to the seller and the true and fair value of the property conveyed.
Taxes Due
As of 2011, each sale of real estate is subject to a tax of 1.28 percent of the purchase price. This is the state minimum collection amount, and it may be subject to additional local taxes.
According to the Municipal Research and Services Center, the Growth Management Act allows local governments to collect additional funds from real estate sales (MRSC).
In Clarkston, Moses Lake, Ellensburg, and Pullman, for example, an additional quarter percent tax is levied, bringing the total tax to 1.53 percent of the sale price. Cities such as Spokane, Tacoma, Seattle, and Wenatchee have a higher rate of 1.78 percent. The highest rate is 2.78 percent, which is levied in the town of Friday Harbor.
Exemptions
Certain transactions are exempt from the real estate excise tax. With valid supporting documentation, real property transferred to heirs for inheritance purposes is exempt.
A death certificate, community property agreement, or copies of recorded trusts or probated wills may be required documents.
However, exempt from the excise tax are sales of standing timber, transportation corridor facilities, and other government-owned properties.
Penalties
If they do not pay the real estate excise tax, at the time of sale, they place a specific lien on the property. The lien remains attached to the property and continues to accrue interest and potential penalties until they pay it in full.
The tax is the seller’s responsibility, and state officials may use a procedure similar to a mortgage foreclosure to collect unpaid excise taxes.
Intangible Tax Georgia Calculator
Following O.C.G.A. Section 48-6-61 and these regulations, an intangible recording tax of $1.50 per $500.00 or fraction thereof of the face amount of all notes secured is due and payable on each instrument securing one or more long-term notes.
Calculation Errors
Please keep the following exceptions to standard fee calculations in mind:
1) This application will not account for any additional recording fees, such as
- additional names
- extra copies
- document certifications
2) The state of Florida requires a minimum of $0.70 to be collected on all deeds recorded in the official record. To ensure the accuracy of standard document calculations, this application does not display this as a default. When calculating the fees to record any deed, always use a minimum sale price of $10.00.
FAQs
What exactly is an intangible tax?
Some states or municipalities levy a tax on the value of intangible assets, such as stocks, bonds, money market funds, and bank account balances.
What is an intangible mortgage tax?
The “intangible tax” is a one-time tax on intangible personal property levied on obligations for payment of money secured by a mortgage or other liens on real estate in Florida. 199.133, Florida.
Who is to collect the Intangible Recording Tax?
The Clerk of the Superior Court is the collecting officer for the intangible recording tax, though, in some counties with a population of 50,000 or less, the collecting officer may be the tax collector or the tax commissioner.
Who pays the transfer tax in Georgia?
The seller is liable for the real estate transfer tax, though frequently the parties agree in the sales contract that the buyer will pay the tax.
Do I have to pay transfer taxes on a refinance?
Short answer: No. Generally, transfer taxes are paid when the property is transferred between two parties and a deed is recorded. In a refinance transaction where the property is not transferred between two parties, no transfer taxes are due. They computed the amount of tax due based on the consideration for the transfer.
