Delaware’s state Realty Transfer Tax Is a Sales Tax — and It’s Too High

Delaware is proud to have no general sales tax. But there is a major exception: buying or selling a home.

When a home is sold, Delaware charges a 4% realty transfer tax—the highest state-level transfer tax in the country. Functionally, this acts as a sales tax on housing, collected at closing and tied directly to the purchase price.

That tax makes homeownership more expensive, discourages people from moving when their lives change, and puts Delaware at a competitive disadvantage.

The transfer tax also affects business owners who buy commercial property, adding thousands of dollars to the cost of opening or expanding a local business (this page does not cover the impact on commercial transactions).

Overview of the Tax

When real property is sold in Delaware, a realty transfer tax is imposed on the value of the transaction at the time of settlement. This tax applies to most transfers of real estate, including residential and commercial properties.

The total realty transfer tax is generally split evenly between the buyer and the seller, unless the parties agree otherwise in the contract. The tax is composed of a State portion and local portions imposed by counties and, in some cases, municipalities.

The State portion of the realty transfer tax is collected at settlement and remitted to the State of Delaware. Local portions are collected at the same time but are distributed to the appropriate county or municipality. These revenues support a variety of public purposes, including state and local services and infrastructure.

The realty transfer tax is assessed based on the full value of the property transferred and is typically paid as part of the closing costs associated with buying or selling real estate.

First-Time Homebuyers:

Delaware law provides a targeted incentive to help reduce the upfront costs of homeownership for first-time homebuyers.

A buyer may qualify for the first-time homebuyer incentive if they have never previously held an ownership interest in residential real property and intend to occupy the purchased home as their primary residence within the required period after closing.

For qualifying first-time homebuyers, the buyer’s portion of the State realty transfer tax is reduced by 0.50 percent on the first $400,000 of the property’s value. This reduction is applied at settlement, lowering the amount due from the buyer at closing.

The reduction applies only to the buyer’s share of the State portion of the tax. County and municipal realty transfer taxes are not affected, and the incentive does not apply to property value above the statutory threshold.

Why This Matters

Buying or selling a home is not a luxury purchase. It’s a life decision.

The current realty transfer tax:

• Raises upfront costs for first-time homebuyers that are not financeable (more cash due at settlement)
• Penalizes seniors who want to downsize and potentially locks them into housing that is no longer appropriate (which also locks up needed housing supply for others)
• Makes it harder for families to relocate for work
• Discourages housing turnover

As home prices rise, the tax rises with them—even if incomes do not. That means families are paying more simply because the market changed, not because they are better off.

A Tax on Moving, Not on Income or Wealth

The realty transfer tax is not based on income or long-term ownership. You only pay it if you move.

Two homeowners with identical homes can pay vastly different taxes based solely on the timing of their transaction. That makes the tax unpredictable, uneven, and disconnected from ability to pay.

We should not punish people for upsizing, downsizing, or adapting their housing to their stage of life. We, further, should not penalize people for wanting to move within Delaware.

A Common-Sense Plan to Lower the Tax

We support lowering the state portion of the realty transfer tax to make housing more affordable while protecting fiscal stability.

This approach would:

• Reduce the cost of buying and selling a home
• Encourage responsible housing mobility
• Improve Delaware’s competitiveness with neighboring states
• Support a healthier, more active housing market

This is about smart reform, not reckless cuts — lowering a distortionary tax that does more harm than good.

Fiscal Responsibility Matters

Lowering the realty transfer tax can be done responsibly.

High transaction taxes discourage activity. A lower rate can:

• Encourage more transactions
• Support construction and local jobs
• Generate broader economic activity
• Produce more stable, sustainable revenue over time

A healthier housing market benefits everyone—homeowners, renters, and the overall economy.

The Bottom Line

Delaware should not have the highest sales tax in the country on buying and selling a home.

Housing should be attainable. Taxes should be transparent. And government should not stand in the way of people making reasonable decisions about where and how they live.

Lowering the realty transfer tax is a practical, fair, and forward-looking reform.

Legislative Proposals Related to Transfer Tax in the General Assembly (2025-2026 Session):

HB 283

This Act provides updates to Title 30 relating to the Realty Transfer Tax. First it clarifies that the exception for spouses is not solely limited between a husband and wife and instead applies to spouses in general. It also adds an exception for conveyances between grandparents and their grandchildren or the spouse of such a grandchild.

HB 286

For conveyances having a property value of less than $350,000, the state will not assess a realty transfer tax. This Act also reduces the State’s rate of realty transfer tax by 1/4% per year for 4 years, for residential property conveyances having a property value of $350,000 to $500,000.