CITY OF CHICAGO REAL ESTATE TRANSFER TAX UP 40% - City Home Buyers Foot the Bill!
SOME SENIORS EXEMPT FROM INCREASE - BUT MANY WILL PAY!
The Chicago City Council yesterday passed a widely-expected 40% increase in the city's Real Estate Transfer Tax, bringing the fee to purchase real estate in Chicago to $10.50 per $1,000 of purchase price - the highest municipal transfer tax in Illinois,and one of the highest of larger cities across the U.S.
With the move, effective April 1st, those buying any residential home, condo, apartment building, vacant lot, or commercial property in the City of Chicago will see their closing costs increase by hundreds, perhaps thousands of dollars, due to the increased tax. Buyers purchasing a $400,000 home under the old Chicago Transfer Tax of $7.50 per thousand would have paid the city $3,000 for the transfer. Under the increased fee, that same buyer would pay $4,200 - an increase of $1,200!
The Chicago Transfer Tax is the responsibility of the BUYER here - there are no exemptions for in-city moves, as their are in several Chicago suburbs. The SELLER Transfer Tax of $1.50 per $1,000 of purchase price, imposed by the State of Illinois and each Illinois county, remains unchanged. For the same $400,000 house, the seller would still pay $600 to the state and county.
There was some resistance to the tax among Chicago Alderman, however. The usual rubber-stamp Chicago City Council passed the increased tax by a vote of 41 to 6. All alderman were heavily lobbied by the Chicago and Illinois Associations of Realtors to vote "no" to the sizable increase. Realtors are concerned the new tax will further stress a sluggish Chicago housing market.
Although some aldermen favored splitting the tax increase between buyers and sellers purchasing property in Chicago, that proposal drew little agreement, and was defeated.
The Transfer Tax Increase was made possible through the provisions of a state bill increasing mass transit funding in the six-county Chicago Metro Area and Downstate Illinois Road Improvement Projects last month. The same bill increased the Sales Tax across Cook County, in which Chicago is located, by 0.25%. Taxes in the five counties surrounding Chicago, and in the Metro Area, will increase sales taxes by 0.5% effective April 1st. The CTA was proposing extensive service cuts and fare increases were that proposed state legislation to fail.
The Illinois Bill earmarks the revenue generated by the Chicago Transfer Tax, projected in reach $2.3 Billion over the next 30 years, to fund the Pension Fund for current and former employees of the Chicago Transit Authority (CTA).
Chicago Seniors over the age of 65 would be exempt from the incremental transfer tax - but only if they purchase a home less than $250,000 in value, and live in that home for at least one year. These seniors would pay the full tax when they buy, and be able to separately apply for a city refund after one year. The $250,000 ceiling would not be adjusted for inflation as home prices increase here - so many seniors would not qualify for the tax exemption long-term.
Also, effective March 17th, active military personnel and disabled veterans, with proper ID, would be able to ride CTA buses and trains for free. The earlier state bill, funding Chicago Area mass transit and downstate roads, already provided for free rides for seniors over 65 in all Chicago Area mass transit - city and suburbs - including regional METRA Commuter Trains, and PACE Suburban Buses.
In reality, the new transfer tax increase, though very high in percentage terms, still leaves Chicago far behind many big U.S. Cities in their Transfer Tax Rates. Those selling property in New York City subject to a $14.25 per thousand Real Estate Transfer Tax for the purchase price exceeds $500,000, plus a Mortgage Recording Fee of $21.75 per thousand, typically paid by the buyer. The Philadelphia Transfer Tax is $30.00 per thousand, to the seller, plus a seller-paid State of Pennsylvania tax, currently $10.00 per thousand, but projected to increase.
Los Angeles Home Sellers pay $4.40 per thousand of sales price, plus a $1.10 per thousand Los Angeles County Tax.
Read Gary Washburn's article in today's Chicago Tribune for more information.
DEAN MOSS & DEAN'S TEAM CHICAGO
