Mortgage recording tax is a one-time government charge collected when your mortgage document is filed with the county recorder or clerk. Roughly a dozen states impose one, at rates that typically run from about 0.1% to over 1% of the loan amount, and the borrower almost always pays it at closing even where the statute nominally puts the charge on the lender. It is not deductible on your federal return, but you can add it to your home’s cost basis, which reduces the taxable gain when you sell.
What Triggers the Tax
The charge is set off by a specific event: filing the mortgage in public records. That filing creates a recorded lien, which is how your lender puts other creditors on notice that it has a secured claim on the property. Lenders insist on recording to protect that priority, and the tax is the government’s price for the service.
Legally, this is an excise tax, not a property tax. A property tax is an ongoing annual charge tied to assessed value. Mortgage recording tax is a one-shot charge tied to a single event, calculated on the principal amount of the loan rather than the purchase price. Buy a $400,000 house with a $320,000 mortgage and the tax applies to the $320,000, not the $400,000.
Where It Applies and How Much It Costs
Most states do not impose a dedicated mortgage recording tax. Where it exists, the name varies: mortgage registry tax, documentary stamp tax on notes, recordation tax, intangible tax. Some states levy both a documentary stamp tax and a separate intangible tax on the same mortgage.
What matters for you is the location of the property, not where you live or where the lender is based. Rates are usually stated as a dollar amount per $100 of mortgage debt or as a flat percentage. On a $300,000 loan, the total can range from a few hundred dollars to well over $3,000. County-level surcharges are common, and some jurisdictions vary the rate by loan size, property type, or county population.
The reliable figure for your deal is on your Loan Estimate, which the lender must send within three business days of receiving your application. Look under “Taxes and Other Government Fees.” If nothing mortgage-specific appears there, your state likely doesn’t charge one. The final number shows up again on the Closing Disclosure.
Who Pays
In practice, the borrower. Some state statutes place liability on the lender, but standard loan agreements pass the cost through, and the money is collected at the settlement table so the mortgage can be recorded right away.
In a soft market, a buyer sometimes negotiates for the seller to absorb the charge as a closing concession. Sellers in strong markets rarely agree. Exemptions exist but are narrow. Fannie Mae and Freddie Mac carry their own statutory tax exemptions, but courts have consistently held those protections do not pass through to individual borrowers whose loans those entities later purchase. Federal credit unions have a statutory federal exemption, but at least one state’s highest court has ruled that the mortgage recording tax is a tax on the privilege of recording a document rather than a tax on the lender, so the exemption doesn’t apply.
Refinancing Triggers It Again
A refinance records a new mortgage, which means the tax hits again, calculated on the full new loan balance rather than the difference between the old and new loans. On a large mortgage, that can add thousands to refinancing costs and eat into the interest savings you were counting on. If you’re running break-even math on a refinance in a state that charges this tax, include it.
Some jurisdictions offer a workaround. Instead of recording a new mortgage, the existing lender assigns the current mortgage to the new lender, and the parties sign a consolidation and modification agreement. Under that structure, you pay tax only on the “new money,” meaning the amount by which the new loan exceeds the unpaid balance of the old one. The old lender has to cooperate, and many won’t, especially when the refinance is moving to a competitor. If the assignment falls through, you pay tax on the full new loan.
Federal Tax Treatment
Mortgage recording tax is not deductible on your federal income tax return. The IRS treats it as a cost of acquiring property rather than a deductible real estate tax. Under the federal tax code, state or local taxes paid in connection with buying property become part of the property’s cost basis rather than a current-year deduction.1Office of the Law Revision Counsel. 26 USC 164 – Taxes The word “tax” makes people assume it belongs on Schedule A next to property taxes. It doesn’t.
Adding it to basis still has value. A higher basis means a smaller taxable gain when you sell. Pay $3,000 in mortgage recording tax at purchase and your basis rises by $3,000, cutting an eventual capital gain by the same amount. IRS Publication 551 lists recording fees and transfer taxes among the settlement costs added to basis, while noting that loan-related costs such as points, mortgage insurance premiums, and appraisal fees required by the lender follow different rules and are not added to basis.2Internal Revenue Service. Publication 551 – Basis of Assets
Keep your Closing Disclosure. It is the cleanest proof of every closing cost you paid, and you’ll want it when you sell, potentially years or decades later. If you refinance and pay the tax again, save that Closing Disclosure too. Each payment adds to your basis.2Internal Revenue Service. Publication 551 – Basis of Assets