Transfer Tax Requires Declaring Personal Property
Ask the Real Estate Lawyer: Real Estate Law Q&A
REM #LAW 685
By Ilyce R. Glink and Samuel J. Tamkin
Summary: A reader is buying a home in a community
that requires the buyer to pay a transfer tax. The buyer is allowed to deduct
the amount of "personal property" that is part of the deal. Now the
buyer is trying to figure out exactly what qualifies as "personal property".
Ilyce and Sam give advise on how to include reasonable deductions.
Q: I'm buying a home in Naperville, Illinois, and the city requires the buyer
to pay a real estate transfer tax.
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The buyer fills out a declaration form and submits it along with a copy of
the real estate contract, and of course, the money, to get the required "tax
stamp" which is needed at the closing.
The declaration form contains a provision to deduct from the sales price the
amount of “personal property” included in the deal. The contract
I signed lists a fair number of personal property items: refrigerator, oven/range/stove,
microwave, central air conditioning, and all tacked down carpeting and planted
Is the definition of "personal property" the same under both the
city’s declaration and the contract? Also, how can I arrive at a reasonable
estimate of the value of "personal property" without incurring much
expense or time? My estimate for these items would be about 15 percent of the
When I inquired at city hall, they told me that the personal property line
item on the declaration has always been zero.
A: If the city’s transfer tax ordinance permits you to exclude from the
purchase the value of the personal property included in your purchase, you should
be able to do just that. Unfortunately, it is unlikely that the exclusion of
most items of personal property left in a home will materially change the amount
of tax you would pay.
What the real estate contract claims to be personal property is more than what
the city would consider to be personal property. In general and in simple terms,
if you can take something from one home to another without damaging the old
home, you might be able to call that something personal property. Some contracts
include the furnace and hot water heaters in their list of personal property.
For practical purposes, the inclusion of these items is to make sure the seller
knows to leave them behind and that you are expecting them to remain. These
items tend to be necessary for the proper working of a home and are attached
to the home via pipes, wires and other connections. Many people consider these
permanently attached items to be fixtures.
Landscaping that is part of a home becomes attached to the land and most people
would not conceive of rolling up the lawn and taking it with them. It could
happen, but most buyers expect the landscaping to stay.
However, there are certain items that are clearly personal property and can
be freely taken by the seller if they are not included in the contract. These
items generally include cars that are parked in the garage, television sets
on top of dressers, and other electronics that may be unplugged and taken with
the former owner.
In some cases the washing machine, clothes dryer and the refrigerator can be
taken by an owner and may not be part of the sale.
If you take the list of items that will be left behind of the type that are
movable items, you will probably realize that your estimate of 15 percent of
the purchase price was probably way too high and in actuality it may be closer
to one or two thousand dollars.
If the transfer tax is about $5 or $10 per thousand dollars of sales price,
you might save $5 to $20 on the transfer tax. Most people in your community
probably have opted to forget about taking the exclusion and pay the tax, particularly
if there is additional paper work that the city would need from you to prove
the value of the personal property.
In high-end homes where people install home theaters, expensive flat-screen
televisions in every room, and sound studios, the value of this equipment can
run into the tens of thousand of dollars.
Contracts for the purchase of these homes can and do specify the value for
each of these systems and the buyer can show the taxing authority that the seller
and buyer allocated a certain amount of the purchase price to the home and a
certain amount of the price to the personal property. In this circumstance,
the home buyer will save a significant amount of money in the transfer tax by
excluding all of these items.
Another example in which a buyer would want to exclude personal property is
in case she is buying a furnished home. The seller may include all of the furniture
of the home and the buyer and seller may even allocate an amount to the furniture.
If they do, the buyer has sound footing to go to the taxing authorities and
not pay a real estate transfer tax on the sale of the furniture.
You will need to re-review what you believe is personal property and decide
whether it is worth it to claim the exemption. Good luck.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce
R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your
Home Faster and For More Money In Any Market. If you have questions for
them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022
or contact them through Ilyce’s website www.thinkglink.com