What are Documentary Stamps?
Documentary stamps (also called doc stamps or documentary stamp tax) are a form of transfer tax applied to the recording of real property deeds and, in some states, to mortgage documents. The term originates from the historical practice of affixing actual revenue stamps to recorded documents. Today, the tax is calculated and paid at closing without physical stamps.
Several states use the term documentary stamps specifically, most notably Florida, which charges $0.70 per $100 of the deed's consideration (sale price) on deed recordings and $0.35 per $100 on mortgage recordings. On a $300,000 sale in Florida, the deed doc stamps cost $2,100 (typically paid by the seller) and the mortgage doc stamps cost $1,050 (paid by the buyer if financing).
Documentary stamps vs. transfer tax
Documentary stamps and transfer taxes are functionally the same thing: a government tax on the transfer of real property. The terminology differs by state. Florida, Virginia, and a few other states use "documentary stamps." Most other states call it "transfer tax," "conveyance tax," or "excise tax." The economic impact on the transaction is identical regardless of the name.
Impact on investor transactions
In states with documentary stamp taxes, both deed recordings and mortgage recordings are taxed, meaning financed purchases pay more in doc stamps than cash purchases. For investors doing double closes, both the A-to-B and B-to-C deeds incur documentary stamps, adding to transaction costs. Assignment transactions avoid the extra deed recording since only one deed is recorded.