If you’ve ever purchased or sold real property in Nevada in the last 50 years, you’ve probably come across Real Property Transfer Tax. The state of Nevada imposed the Real Property Transfer Tax (“RPTT”) in 1968. Pursuant to NRS Chapter 375, RPTT applies to the transfer of all real property in each county of Nevada, and (surprise, surprise), it’s a tax that must be paid in order to legally allow your property to change hands. A common question we get is, “How the h-e-double-hockey-sticks is RPTT calculated?!”
How to Calculate Real Property Transfer Tax
Well, currently (Nov. 2015), in Clark County, Real Property Transfer Tax is imposed at a rate of $2.55 per $500, or portion thereof, of the value of the real property (explained in more detail below). $1.95 of this tax is transmitted to the Nevada State Controller, and the remaining $0.60 is transmitted directly to the Clark County Treasurer for deposit in the Clark County School District fund. God knows our school district needs it!
Anyway, here’s a quick example of the way in which RPTT would be calculated for real property with a value of let’s say… $254,506.00.
*509.012 is rounded to 510 to account for the “portion thereof language.” 510 x 2.55=1300.50
Therefore, upon the transfer of real property in Clark County with a value of $254,506.00, the RPTT would be $1,300.50.
RPTT is Typically Paid by The Transferor of Real Property.
In straightforward re-sale transactions that involve the transfer of real property, the Transferor would typically be responsible to pay the Real Property Transfer Tax based on the purchase price of such property (although, this is a negotiable item in Nevada, and the Transferee (buyer) may end up paying it some cases, especially when buying a new home). However, RPTT also applies to transfers of real property that do not amount to a traditional sale. For example, if an LLC owns several commercial buildings, and the members (owners) decide to simply transfer ownership of one of those buildings to a different LLC that they own a portion of, the members would be subject to paying RPTT for such a transfer. In this situation, no money is changing hands for the property, so the value is determined in one of two ways. If the real property in question has been sold in the last 5 years, the Clark County Assessor will likely base the RPTT on the sale price of the property. In the event the real property has not been sold in the last 5 years, the Assessor will use the Total Taxable Value (“TTV”) of the property for the current year. A property’s TTV can be found by conducting a property search at the Clark County Nevada website.
There Are Helpful Exemptions to RPTT.
NRS 375.090 provides several exemptions to RPTT. The common exemptions for most individuals and businesses are as follows:
- Change of Business Type. In the event you own a business that owns real property, and you change the name, type or place of organization of that entity, any transfer of the real property to the “new” entity is exempt from RPTT. This includes transfers to parent companies, subsidiaries and affiliated businesses; so long as the ownership of any affiliated business entity is identical to the entity doing the transferring. See NRS 375.090(1).
- Individual Entity. If you own real property as an individual, and you also own a business entity, you may transfer that real property to your entity without paying RPTT so long as you own 100% of the business entity. See NRS 375.090(9).
- Gift Transfer. If you own real property with others, either as individuals or entities, you may transfer your interest to any one or more joint tenants or tenants in common without paying RPTT so long as the transfer is being completed without money (or other consideration) changing hands. See NRS 375.090(4).
- Family Transfer. You may transfer any real property you own, with or without consideration, to any person to whom you are related within the first degree of lineal consanguinity (i.e. your children or your parents) or affinity (i.e. spouse, mother-in-law, father-in-law, daughter-in-law, son-in-law, stepchildren, stepparents). See NRS 375.090(5).
- Trust Transfers. You may transfer, without money changing hands, any real property you own to or from a trust. See NRS 375.090(7).
Again, these are just a few of the RPTT exemptions you may qualify for. When transferring real property, be sure to look into these exemptions as they may come in handy and save you a nice chunk of money.
At Bongiovi Law Firm, we handle many different types of real estate transactions for our clients, most of which are commercial. Please feel free to contact us with any questions on RPTT, or other commercial real estate needs.