Transferring deed to LLC: Consideration and Transfer Tax?

16 Replies

Hello,

My father is seeking to transfer a paid off SFR rental property in Florida from his name to a newly formed LLC, under his and my mother's administration.

I have researched that there is a transfer tax based on the "consideration" of the exchange in title owner. 

Is it possible to have the consideration be something minimal, like $10, or does it have to be the actual appraised value of the house? If charged transfer tax on the appraised value, that would be thousands of dollars. Note we are not actually selling to a buyer, only transferring ownership to my dad's new LLC.

How can we minimize transfer tax in Florida for this?

Thanks for your help!

Hi @Yuri Couto I'm extremely new at this but maybe your parents could do a Quitclaim Deed. They are most often used to transfer property between family members, as gifts, placing personal property into a business entity (and vice versa) or in other special or unique circumstances. Since quitclaim deeds are setup solely for this purpose there should not be a transfer tax because there is no sale. You should only be charged the cost of preparing the quitclaim deed & the actual county recording. But please look into this information because as I stated before I am extremely new at this. 

I don't know the legal implications or anything about Florida transfers, but in many states, the difference between a quitclaim deed and a grant deed (or warranty deed) is just title assurances. It has nothing to do with transfer taxes. Transfer taxes generally relate to consideration paid. So if someone is using the property they own to fund an LLC they also own, there isn't consideration paid, so no transfer tax.

To distinguish the difference:

- Scenario 1: Someone starts an LLC, "capitalizes" (funds) it with $300,000, and then uses the $300,000 in the LLC account to purchase a property. The LLC is paying consideration for a newly acquired property, so consideration is paid. Therefore, when recording the deed transferring interest from old owner to new LLC, transfer taxes are due.

- Scenario 2: Someone owns a property as an individual. That same person establishes an LLC and transfers the property into the LLC -- hence "capitalizing" the LLC with the property. No consideration was paid. Therefore, in the deed from the individual to the LLC, no transfer tax is due.

The county recorder/register of deeds might actually answer this too - they can't give legal advice but asking a question just to confirm you're right is fine, i.e., "if I own a property and transfer is to my LLC, I don't owe transfer taxes, right?"

@Raquel Doheny in Florida, when transferring title, transfer tax is due based on mortgage balance. If the property is owned free and clear, there is no tax. If there is a mortgage on the property, the tax is .7% of the remaining mortgage balance (.6% in Miami Dade county, I believe)

@Jason D. Is the distinction if you're transferring a home without consideration, but there is a mortgage balance, then transfer tax is due on the outstanding mortgage balance?  

(Otherwise I take that to mean the recorder only collects transfer tax if a property is sold with a mortgage - but I'm assuming the recorder wants to collect that tax for every sale for actual purchase price, not just a mortgage balance!)

Originally posted by @Yolanda Eiland :

Hi @Yuri Couto I'm extremely new at this but maybe your parents could do a Quitclaim Deed. They are most often used to transfer property between family members, as gifts, placing personal property into a business entity (and vice versa) or in other special or unique circumstances. Since quitclaim deeds are setup solely for this purpose there should not be a transfer tax because there is no sale. You should only be charged the cost of preparing the quitclaim deed & the actual county recording. But please look into this information because as I stated before I am extremely new at this. 

 Yuir, Yolanda is correct.  I've done this many times - using a Quitclaim Deed.  It cost me $50 recording fee.  There is no transfer tax.  However, you've not cited the source regarding the "transfer tax" so I'm not sure if that's limited to a county or city tax.  I've never paid such and I've Quitclaimed my properties several times. Hope that helps.

Hi. I am in a similar situation, but the property has a mortgage. Is it very likely that the bank would enforce the due on sale clause if title was switched from myself to the LLC?

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