Tax Consequence of Adding Name to Title of Property

by Mallory Malesky ; Updated July 27, 2017

Property owners have the authority to grant a portion of ownership to another person at virtually any time. An owner may want to add a name to the property title for a variety of reasons, such as marriage. An additional owner's name is added to the property title by a deed. Certain tax consequences are involved during this process.

Process

Each state has established specific rules and regulations regarding deed transfers. Almost all states accept the quitclaim deed to add a name as an owner. A quitclaim deed provides no guarantee from the grantor to the grantee that the title is in good standing. The only function a quitclaim deed serves is to transfer the current owner's interest in the property to the new owners. In the case of adding a name, the owner would grant his interest to himself and the other person. Once the deed is filed on record, the new owners' names become the current owners listed when a title search is conducted.

Transfer Taxes

A lot of states impose transfer taxes on deeds. The tax collected is based on the consideration paid to the seller for the property. Often, when a name is added to the title and the original owner remains and owner no cash changes hands. A deed can cite zero dollars, or a negligible monetary amount such as $1 in these cases. If there was an exchange of money, transfer tax is owed.

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Exemptions

The states that assess transfer taxes also usually offer a number of exemptions to the tax. The most common exemption regards transfers between spouses. Adding a spouse to the property title is usually exempt in most places. Other common exemptions include parent-to-child transfers. The local recorder of deeds or clerk is able determine if a deed is exempt or not.

Property Taxes

The owner of real property is responsible for paying property taxes to the correct authority when they become due. By adding a name to the title through a quitclaim deed, the person added becomes equally responsible for property tax payments. Property taxes paid throughout the year are deductible on that year's income tax return.

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