Alabama Deed Tax on Equity

Alabama charges a deed tax of $0.50 per $500 of value — $1.00 per $1,000 — when a deed is recorded. Apply that to a $300,000 purchase and you would expect $300.

On a financed purchase, you would be wrong, and wrong in your favour.

The rule

When a deed and a mortgage are recorded at the same time, the deed tax is calculated on the down payment or equity, not on the full purchase price. The reasoning is that the financed portion is already being taxed separately through the mortgage tax.

What that means in practice

Buy at $300,000 with $240,000 financed. Your equity is $60,000. Deed tax is calculated on that:

$60,000 ÷ $500 × $0.50 = $60.00

Not $300. And if the entire purchase price is financed, the deed tax floors at fifty cents.

Where estimates go wrong

Any generic closing-cost calculator that applies $1.00 per $1,000 to the purchase price will tell you $300 on that transaction. It is a fivefold overstatement, and it happens constantly because the rule is specific to Alabama and most national tools do not encode it.

The mortgage tax is separate

Do not celebrate too early. Mortgage tax is charged independently at $0.15 per $100 financed, rounded up to the next full $100. On that same $240,000 loan:

$240,000 ÷ $100 × $0.15 = $360.00

So the pair together come to $420 — still far below Pennsylvania's transfer tax on an equivalent purchase, but not the $60 the deed tax alone suggests.

Cash purchases work differently

With no mortgage recording alongside it, the deed tax is charged on the full price. A $300,000 cash purchase carries the full $300 — and no mortgage tax at all.

Note: general information for Pennsylvania and Alabama property owners, not legal or tax advice. Rates, taxes, eligibility and deadlines are set by statute and by each state’s filed rate schedules and can change. Confirm the specifics with us and with a qualified professional before relying on them for a transaction.