DC Recordation Tax Reduction: Potential Savings for First Time Homebuyers

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.

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%: (as of 7/17/2019)

  • Each grantee is a first time DC homebuyer purchasing a principal residence
  • Qualify for the DC Homestead Deduction
  • Purchase a property with a sales price under $632,500
  • Have a total household income not exceeding these income levels based on total persons in household:
    • 1 person $147,780
    • 2 persons $168,840
    • 3 persons $189,900
    • 4 persons $210,960
  • 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 an 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 also qualify for other first time and/or income-capped home buyer programs.

Buyers should not rely solely on this information to determine their eligibility for this program. Information changes yearly, so please contact us for more information.