REAL ESTATE TRANSFER TAX
Chicago currently has a law called the Real Estate Transfer Tax (RETT). This is a tax imposed when titled real estate property is transferred within the city of Chicago.
As of late 2019, Mayor Lightfoot is calling for an increase in the transfer tax. The Mayor is looking for a graduated tax for real estate transfers, as well as a reduction in the rate for homes worth less than $500,000.
What does this mean for the real estate industry?
Traditionally, REALTORS® oppose any increases in real estate-related taxes and/or fees that will increase the cost of a transaction.
We are committed to opposing increases to the Real Estate Transfer Tax. If the City Council seeks the ballot referendum, CAR will vigorously oppose the measure through meetings with members of the City Council and by engaging our members to make sure elected officials know we are the voice of real estate.
As of 2019, the rate of this tax is $0.75 per $500 of the transfer price – or fraction thereof – of the property. In 2008, an additional supplemental tax of $1.50 per $500 was added to the RETT, making the total tax $2.25 per $500. Funding collected from this supplemental tax supports the Chicago Transit Authority (CTA), where the buyer pays the supplemental rate of $1.50 per $500, and the seller pays the rate of $0.75 per $500.
There are two probable ways this transfer tax could be implemented. The first is dependent on the Illinois General Assembly.
Currently, the Mayor is seeking the Illinois General Assembly (ILGA) to act. If the ILGA approves the measure, the city of Chicago may begin collecting the tax upon the effective date. The proposed legislation was never heard during the ILGA veto session. During the Mayor’s budget hearing on November 26, 2019, the Mayor’s floor leader, Alderman Gilbert Villegas – who addressed CAR’s Coffee w/ the GADs audience in October – advocated for the transfer tax. “The Springfield session begins in January, [and] we look forward to going down to Springfield and advocating for this RETT. We need that revenue,” Villegas said.
Even though the city seeks Springfield intervention, the city of Chicago has home-rule authority and can impose the tax increase via two steps. First, the City Council can approve a ballot referendum, which means the matter will be placed on the ballot for the approval of the voters. By state law, the City Council will need to approve this by December 30th. As there is only one more city council meeting scheduled for the year, the referendum option for the March ballot seems very unlikely.