Chicago Transfer Tax and Divorce
Okay so we all know that it costs $7.50 per $1,000 of purchase price for the privilege of purchasing property in the City of Chicago. However, there are several types of transactions that are exempt from the transfer tax. Some of the obvious ones being transactions where consideration is under $500 and to correct former deed errors. One area that in my experience used to be exempt at least in practice used to be situations where people got a divorce and one former spouse quit claimed a residence to the other former spouse.
However, in speaking with attorneys of late and the folks over at the Cook Recorder, they're now actively enforcing the transfer tax ordinance in these divorce/quit claim deed situations. The City of Chicago transfer tax form has some specific language noting that divorce scenarios are NOT exempt. So in the near term make sure you're dealing with this in marital settlement agreements, ect. As high as the tax is, it can start to be real money. Saw this in the Sun-Times regarding Alderman Burke's attempts to make divorce transfers exempt.
posted by Peter @ 9:23 AM
7 comments
7 Comments:
If the couple was married at the time of the transfer and later got divorced, what effect does this law have? Is there a look back period? Further, if there was a divorce and the transforee had equity in the property, should the tax obligation be reduced by the equity he had the the property. it seems this is really a way for the city to get money.
If the couple was married at the time of the transfer and later got divorced, what effect does this law have? Is there a look back period? Further, if there was a divorce and the transforee had equity in the property, should the tax obligation be reduced by the equity he had the the property. it seems this is really a way for the city to get money.
Some towns also have their own transfer taxes. Some are paid by the buyer, some by the seller and some are paid by both. The Chicago real estate transfer tax is $3.75 per every $500.00 and is paid by the buyer. I had a telephone conversation today with a buyer regarding this tax. He felt it was an exorbitant amount and wanted to know if the property sales price could be adjusted to offset this tax charged to the buyer. I answered that everything is negotiable, but this is a customary buyer fee and not all sellers will want to negotiate this normal buyer cost.In fact, the buyer kept wondering if something could be done through the mortgage company and it took a bit of explaining to make him realize that this fee has nothing to do with the mortgage. This is not the same as "points" and is not a fee required by any kind of bank, savings and loan or mortgage broker.
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francis
Link Building
Anytime there's a non-exempt transfer there will be a tax. The issue isn't the divorce per se, the issue is that oftentimes in a divorce one property will keep the home and the other party will convey his/her interest to the other and that needs to be recorded which is when the tax would need to be paid.
Finance Committee Chairman Edward M. Burke (14th) wants to stop that financial strain by exempting divorcing or separating couples from the transfer tax whenever the family home remains in the hands of husband or wife.
Since 1995, the city’s Revenue Department has taken the opposite, more mercenary view. Property transfers stemming from divorces or legal separations have been covered by the tax. The so-called divorce penalty was made worse by a 40 percent increase in the real estate transfer tax tied to the CTA bailout.
“This overzealous enforcement of the code has placed a harsh and unfair burden on couples and should be reversed,” Burke said in a press release.
Calling the tax double-jeopardy, the alderman said, “Essentially, these couples are forced to pay the transfer tax twice — once when they buy their home and then again when they legally dissolve their marriage.”
Burke noted that divorce settlements routinely include a so-called “quit-claim deed” where either husband or wife relinquish part ownership of the home and put it in the name of the former partner.
The ordinance introduced at Wednesday’s City Council meeting would exempt “transfers between parties by order of court resulting from a legal separation or divorce proceeding.”
The proposed divorce exemption comes at a time when Mayor Daley is scrounging around for every available penny to eliminate a $420 million shortfall, the city’s worst budget crisis in a generation.
Revenue Director Bea Reyna-Hickey could not be reached for comment on the potential loss of revenue.
Cheers,
Greg
Chicago Laser Hair Removal
I am one of the likely hundreds hit by this unfair and unethical tax penalty. I would be interested in others so affected by this unfair tax---maybe if we, as a group, petition our alderman, we can get this ordinance revoked.
Keep your eyes open. There is current talk about eliminating this tax in the circumstance of a divorce and they've been talking about making it retroactive.
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