A little-known fact that often surprises elected officials (and even some REALTORS®) is that Illinois municipal real estate transfer taxes are the exception rather than the rule.
This is largely due to late 1990s Illinois REALTOR®-led legislation that allowed only home rule municipalities that won approval by referendum to adopt a real estate transfer tax. Since the late 90s, only municipalities with a grandfathered transfer tax, and a small number of municipalities that won voter approval lay claim to a real estate transfer tax.
In fact, only 5 percent of Illinois municipalities levy a real estate transfer tax. That’s worth repeating because it shocks people: only 5 percent of Illinois municipalities tax the sale of real estate. (Click here to see the list of municipalities.)
Transfer taxes are regressive, unfairly penalize those who move more frequently, and increase housing costs, limiting housing choices for some on the margins. The National Association of REALTORS® estimates that for every $1,000 increase in the cost of a house, 250,000 people are priced out.
It is for those reasons we urge municipalities to eliminate or reduce the burden of their existing transfer tax. The city of Lake Forest (Lake County) offers a refund of up to $2,000 to property owners who sell and buy within the city limits. Recently the North Shore – Barrington Association of REALTORS® successfully advocated to allow property owners to claim that rebate over a two-year period rather than a one-year period. The change would allow those who purchased a home but, for any number of reasons, could not sell their existing home within one year, to claim the rebate within two years (three for extenuating circumstances).
The change is small and will only benefit a limited number of property owners, but it’s an incremental step toward being on par with 95 percent of Illinois municipalities with no transfer tax.