Which statement best defines transfer tax?

Which statement best defines transfer tax?

• A. A tax based on assessed value of property.
• B. A tax on the transfer of property.
• C. A tax on rental income.
• D. A credit against property tax.

Answer: (B)

Transfer tax is a one-time tax charged when property changes ownership. It’s tied to the act of transferring title—from seller to buyer—typically paid at closing and based on the sale price or property value, depending on the jurisdiction. This differs from property tax, which is an ongoing annual charge based on assessed value; from a tax on rental income, which is a tax on earnings from renting property; and from a credit against property tax, which reduces the amount owed rather than adding a new charge.

Transfer tax is a one-time tax charged when property changes ownership. It’s tied to the act of transferring title—from seller to buyer—typically paid at closing and based on the sale price or property value, depending on the jurisdiction. This differs from property tax, which is an ongoing annual charge based on assessed value; from a tax on rental income, which is a tax on earnings from renting property; and from a credit against property tax, which reduces the amount owed rather than adding a new charge.