Alabama · Code §§40-22-1, 40-22-2Alabama deed tax and mortgage tax: why the loan lowers the deed tax
Alabama's probate judge will not record a deed until the privilege tax is paid: 50 cents for each $500 of the value conveyed (Code of Alabama §40-22-1(c)). Only the value above any mortgage on the property on which the mortgage tax has been paid is taxable, so a purchase financed with a recorded mortgage pays deed tax on the down payment portion. The mortgage itself is taxed at 15 cents per $100 of the initial debt (§40-22-2(1)). Every deed must come with proof of the actual price on the Department of Revenue form; without it the tax is based on the assessed value and penalties apply (§40-22-1(c)–(d)). On a $400,000 cash purchase the deed tax is $400; with a $360,000 loan it is $40 on the deed plus $540 on the mortgage.
Rate, who pays and an example
Deed tax
50¢ per $500 of value, 50¢ minimum (§40-22-1(c)).
Mortgage credit
Only value above a mortgage on which mortgage tax is paid is taxed (§40-22-1(c)).
Mortgage tax
15¢ per $100 of the initial indebtedness (§40-22-2(1)(a)).
Proof of value
Department of Revenue form with the actual price; otherwise assessed value plus penalties (§40-22-1(c)–(d)).
Example – $400,000
Cash: $400 deed tax. With a $360,000 loan: $40 deed tax + $540 mortgage tax.
Good to know
- Correction deeds for nominal consideration and transfers of mortgages already taxed are exempt from the deed tax (§40-22-1(b)).
What the TC checks
- The tax line on the closing statement against the statutory rate.
- Who pays it – the statute, the contract or local custom.
- The value or consideration stated on the deed or declaration.
Questions about this tax
How much is the deed tax in Alabama?
50 cents per $500 of value – $400 on a $400,000 cash sale (Code of Alabama §40-22-1).
Does a mortgage reduce Alabama deed tax?
Yes. Only the value above a mortgage on which the mortgage tax is paid is taxable, so a financed purchase pays deed tax mainly on the down payment.
What is the Alabama mortgage tax?
15 cents per $100 of the initial debt – $540 on a $360,000 loan (§40-22-2).
Related guides
Add the transfer tax check to the closing statement review as a task with an owner and due date in ClosingCode.
Start free trialSource: Code of Alabama §§40-22-1 and 40-22-2 (alison.legislature.state.al.us, read October 25, 2026).
General information, not legal or tax advice. ClosingCode is software; it is not a law firm or brokerage. This guide is not a substitute for the advice or services of an attorney.