| Buying | By Anslie Stokes

Many first time homebuyers cite saving for their downpayment and closing costs as one of the most difficult steps in purchasing their first home.

Adding to the challenge, Washington, DC has some of the highest closing costs in the country. A large part of closing costs in any jurisdiction is the ‘transfer and recordation’ taxes charged to the buyer and/or seller by the local and state governments.

Here is what you need to know about Washington, DC Transfer and Recordation Taxes:

Who pays what?

  • Sellers in DC pay the ‘transfer tax’
  • Buyers in DC pay the ‘recordation tax’

How much?

  • The current transfer tax on a sales price below $399,999 is 1.1%
  • The current transfer tax on a sales prices at or above $400,000 is 1.45%
  • The current recordation tax on a sales price below $399,999 is 1.1%
  • The current recordation tax on a sales prices at or above $400,000 is 1.45%

What does it apply to?

  • Transfer and recordation taxes apply to all residential real estate transactions including cooperatives. There are some rare exceptions though.

The transfer and recordation taxes collected are one of the biggest sources of income for DC. Relief, however, is on the way for first time homebuyers, courtesy of the Washington, DC City Council. Effective October 1, 2017, the recordation tax paid by buyers can be reduced by up to 50% if certain criteria are met.

Here is how to qualify for a recordation tax of .725%:

  • Be a first time DC homebuyer purchasing a principle residence
  • Qualify for the DC Homestead Deduction
  • Purchase a property with a sales price under $625,000
  • Have a total household income not exceeding these income levels based on total persons in household:
    • 1 person $139,140
    • 2 persons $158,940
    • 3 persons $178,740
    • 4 persons $198,540
  • Work with an experienced agent who will assist you in applying for the lower tax. It can not be applied for retroactively, so once closing is complete, there is no way to realize the savings!
  • Work with a local, experienced lender and title company who will be integral in making sure the application is completed and submitted correctly
  • Be mindful of unimproved lots (separately deeded parking spaces or out-lots) as they do not qualify for the tax reduction

 

You may qualify for other first time and/or income-capped home buyer programs – be sure to read all about Homebuyer Financial Assistance Programs in DC.

Buyers should not rely solely on this information to determine their eligibility for this program.

Are you ready to buy your first home? Want to learn more about the process? Call us for a consultation today at 202.270.1081, email us at anslie@thestokesgroup.com, or book an appointment with us.

 

Anslie Taylor Dana_group_photo

The Stokes Group is a team of dedicated professionals who have passion for the real estate business and will advocate for our clients with the utmost honesty, integrity, and confidentiality. We believe in building solid relationships with our clients and that starts by getting to know who we are. Follow us on Facebook and Instagram.

Comments

Leave A Comment

Your email address will not be published. Required fields are marked *

Solid, Professional Advice,

Delivered to Your Inbox

Just enter your email address, and get our latest posts conveniently emailed directly to you.

  • This field is for validation purposes and should be left unchanged.