"How Are Alabama's Mortgage Tax and Deed Tax Figured, and Why Does Your Loan Shrink the Deed Tax?"

Two lines on your Alabama closing statement carry the word "tax," one for recording your deed and one for recording your mortgage. They look alike on the page and come out very differently in size. On a financed purchase the deed line usually comes out smaller than you would guess from the price of the home, and the reason is a single sentence in the state's deed tax statute.

Alabama taxes your mortgage at 15 cents for each $100 of the loan, and your deed at 50 cents for each $500 of value, with any fraction rounded up to a full unit. On a financed purchase, the deed tax applies only to the value above the mortgage on which the mortgage tax has been paid. So the more you finance, the higher the mortgage tax and the lower the deed tax.

I'm Jeff Moran, a mortgage broker in Bluffton, South Carolina, originating since 1996, licensed in fifteen states, including Alabama, NMLS #483943, through C2 Financial Corporation. In this article I'll walk you through the arithmetic: what each Alabama tax is charged on and how the two fit together. Your contract decides who pays them, and who pays closing costs under the standard Alabama purchase agreement covers that paragraph.

Alabama has two recordation taxes on a purchase

Most states charge a recording fee to put your mortgage on the public record and stop there. Alabama charges a tax on the mortgage itself, and a separate tax on the deed. The mortgage recording tax page shows how few states tax the mortgage this way, and the Alabama mortgage page explains why the mortgage tax reaches a refinance here too.

Both taxes are collected at the county probate office, which is where Alabama records deeds and mortgages. Both are separate from the probate office's ordinary recording charges, which show up on their own lines.

Figuring the Alabama mortgage tax

The mortgage tax comes from Code of Alabama § 40-22-2. The Alabama Department of Revenue's recordation tax page states the rate as "$.15 per $100 of indebtedness or fraction thereof," and adds that it also covers deeds of trust and conditional sale contracts.

I start with the loan amount when I walk a client through this one, because the tax is figured on the debt your mortgage secures and the price of the home never enters into it. The probate office divides your loan amount into $100 units, rounds any leftover piece up to one more full unit, and charges 15 cents for each unit.

A loan of $347,760 works out like this:

Step	Amount
Loan amount	$347,760
Divided by $100	3,477.6 units
Rounded up to a full unit	3,478 units
Times $0.15	$521.70

A home equity line of credit or another open-end mortgage has a rule of its own. The current text of § 40-22-2 gives whoever records it the option of paying on the maximum principal written into the line of credit or mortgage, however much is drawn on it later. That matters if you are adding a line of credit at closing, and it does not change anything on an ordinary first mortgage.

Figuring the Alabama deed tax

The deed tax comes from a different section, Code of Alabama § 40-22-1. The Department of Revenue's page states it as "$.50 per $500 of value or fraction thereof." The probate office divides the value into $500 units, rounds any leftover piece up, and charges 50 cents per unit.

On a cash purchase there is no mortgage, so the full price is the value being taxed. A $386,400 cash purchase works out like this:

Step	Amount
Purchase price	$386,400
Divided by $500	772.8 units
Rounded up to a full unit	773 units
Times $0.50	$386.50

The price the probate office uses comes from the paperwork filed with your deed. The Alabama Real Estate Sales Validation Form, RT-1, is the usual way that figure reaches the judge of probate, and that article covers what the form asks for.

The credit for your mortgage, in the statute's own words

Section 40-22-1 does not tax the whole price on a financed purchase. The 2025 Code of Alabama text of § 40-22-1 says that "only the value in excess of any mortgages or vendor's lien upon any property within this state on which the mortgage tax has been paid shall be taxable under this section."

The Legislative Services Agency's 2024 tax guide, written for Alabama legislators, says it in plainer words: the deed tax "applies only to the value in excess of any lien on which the mortgage record tax has been paid."

So on a financed purchase, the probate office subtracts your mortgage from the value and charges the deed tax only on what is left. I'd point out two conditions written into that sentence. The mortgage has to be on property in Alabama, and the mortgage tax on it has to have been paid. The statute says "any mortgages," plural. If a second mortgage is part of your purchase, your closing attorney or title company can confirm how it is counted when they figure both lines before the closing statement is final.

Financing more of the price, and what it does to both taxes

Every $100 you finance adds 15 cents of mortgage tax. The same $100 comes out of the deed tax base, which takes away 10 cents of deed tax, because 50 cents per $500 is 10 cents per $100. So each $100 you borrow raises the combined total by about a nickel.

That nickel is small next to everything else that changes with your down payment. A larger loan moves the payment, the mortgage insurance and the cash you keep in the bank by far more than it moves the recordation taxes. I'd still put both taxes in front of you when we compare your options, so you see the whole closing statement, but they will rarely be what decides it.

An example Alabama purchase

Numbers below are made up to show the mechanism. They are not a real file, a quote or a rate.

You are buying a home in Shelby County for $386,400. You are weighing 10% down against 20% down on a conventional loan, and you want to see both taxes on both versions before you choose, so I'll lay them out side by side.

With 10% down, a loan of $347,760:

Line	Figure	Tax
Mortgage tax: 3,478 units of $100 at $0.15	$347,760	$521.70
Deed tax base: $386,400 minus $347,760	$38,640
Deed tax: 78 units of $500 at $0.50		$39.00
Both recordation taxes		$560.70

The deed tax base of $38,640 divides into 77.28 units, and the fraction rounds up to 78.

With 20% down, a loan of $309,120:

Line	Figure	Tax
Mortgage tax: 3,092 units of $100 at $0.15	$309,120	$463.80
Deed tax base: $386,400 minus $309,120	$77,280
Deed tax: 155 units of $500 at $0.50		$77.50
Both recordation taxes		$541.30

Borrowing the extra $38,640 adds $57.90 of mortgage tax and takes $38.50 off the deed tax. The combined difference is $19.40, close to the nickel per $100 described above, with the rest coming from rounding. Paying cash for the same home would carry only the deed tax on the full price, $386.50, and no mortgage tax at all.

If this were your purchase, I'd tell you the decision between 10% and 20% down turns on the payment, the mortgage insurance and how much cash you want left after closing. The recordation taxes move by less than twenty dollars either way.

Steps for getting both taxes right before your Alabama closing

1. You'll want both taxes in your cash-to-close estimate before you write an offer. Getting pre-approved for an Alabama mortgage is where your loan amount gets set, and the loan amount drives both tax lines.
2. It helps to read the cost paragraph of your purchase agreement to see who pays each tax. The tax statutes say what is taxed, and the contract says whose side of the closing statement the tax lands on.
3. If you are comparing down payments, I can give you both versions of the closing estimate, each with its own mortgage tax and deed tax figured on its own loan amount.
4. At the closing table, please compare the price on the RT-1 or the deed with your final contract, because that figure is the starting point for the deed tax.
5. If a second mortgage or a line of credit is part of your purchase, please let me know early so its mortgage tax is figured on the right amount and your closing attorney or title company can confirm how it affects the deed tax.

Common mistakes with Alabama's recordation taxes

Estimating the deed tax on the full price of a financed purchase. On a cash purchase the full price is right. With a mortgage, the deed tax applies only to the value above the mortgage, so the full-price figure overstates it.

Leaving the mortgage tax out entirely. Most states do not tax the mortgage, so a closing-cost estimate built on another state's costs will not have this line. In Alabama the mortgage tax is usually the larger of the two lines on a financed purchase.

Forgetting the rounding. Both taxes round any fraction up to a full unit, $100 for the mortgage and $500 for the deed. The difference is less than a dollar, and it is the reason your own math may come out a hair below the closing statement.

Treating a change in the loan amount as a change to only one tax. If the loan amount moves, both lines move, in opposite directions. A final closing statement with a different loan amount from your estimate should show a different figure on each line.

Your next step on an Alabama purchase

You can see both taxes on your own numbers before you make an offer. Running your numbers on the homepage shows you rates priced for your scenario, your debt ratio, and closing costs that include both Alabama recordation taxes.

The general guide to closing costs covers the rest of the closing statement, and if you are refinancing rather than buying, the Alabama refinance page explains how the mortgage tax reaches a new loan when there is no deed.

Nothing here is a loan approval, a denial, a commitment to lend, or legal or tax advice. The recordation taxes are set by the Code of Alabama, and your county probate office figures what is due when your deed and mortgage are recorded.

Common questions

How much is the mortgage recording tax in Alabama?

Alabama's mortgage tax under Code of Alabama § 40-22-2 is 15 cents for each hundred dollars of the debt the mortgage secures, with any fraction of a hundred rounded up to a full unit. The Department of Revenue applies it to deeds of trust as well. The worked examples above show the arithmetic on an example loan amount.

How is the Alabama deed tax calculated?

The deed tax under Code of Alabama § 40-22-1 is 50 cents for each five hundred dollars of value, with any fraction of five hundred rounded up. On a cash purchase the value is the full price. On a financed purchase, only the value above the mortgage on which the mortgage tax has been paid is taxed, so the deed tax is figured on roughly your down payment.

Does my mortgage reduce the deed tax in Alabama?

Yes. Section 40-22-1 says that "only the value in excess of any mortgages or vendor's lien upon any property within this state on which the mortgage tax has been paid shall be taxable under this section." So the deed tax is figured on the value minus your mortgage, once the mortgage tax on that mortgage has been paid. Financing more raises the mortgage tax and lowers the deed tax by a smaller amount.

Do I pay both the mortgage tax and the deed tax when I buy a home in Alabama?

On a financed purchase your deed and your mortgage both get recorded, so both taxes are figured. The mortgage tax is charged on the loan amount and the deed tax on the value above it. A cash purchase has no mortgage and carries only the deed tax, on the full price. Your purchase agreement, rather than the tax statutes, decides who pays each one.

Is Alabama raising the mortgage recording tax in 2026?

A 2026 bill, SB244, was introduced to change the mortgage record tax and send part of it to the Alabama Housing Trust Fund. It was referred to committee in February 2026, and LegiScan lists it as dead. The rate in effect is still the 15 cents per hundred dollars stated in § 40-22-2 and on the Department of Revenue's recordation tax page.