District of Columbia Transfer And Recordation Tax
Hello this is Deirdre Brown your settlement agent serving the District of Columbia, Maryland and Virginia. Today I’m going to talk to you about the District of Columbia’s Reduced Recordation Tax for First time homebuyers. This is part one of a two part video series.
This program allows a buyer to reduce their recordation tax from 1.1% or 1.45% to 0.725%. For example if a condominium or a single-family home was priced at $350,000 it would save the home buyer about $1,300 in recordation taxes.
In order to qualify for this reduced recordation tax credit the buyer will need to, one be a first-time homebuyer in the District of Columbia. That is defined as never having owned property in the District of Columbia. There is a slight exception. If the buyer was married previously and owned property jointly with their spouse but now they are divorced, sold the property due to a separation agreement or divorce decree they are now considered a first-time District of Columbia homebuyer. Other than that you could never have own property in the District of Columbia to be considered a first time homebuyer for this program.
This tax credit is income driven. For the 2020-2021 tax year, if the household consist of one-person the income cap is $158,769. If it is a two-person household the income cap is $181,440 and it goes up from there. So you can see how a lot of buyers may qualify for this because the income is pretty generous. The income chart is adjusted every October 1 because that is the beginning of the tax year for the District of Columbia.
The buyer will need to submit an application at the time of settlement. It is a three page application and the buyer will also submit supporting documentation. I have a separate video where I go over what the supporting documentation are. The buyer can only apply for this reduced recordation tax at the time of settlement so coordination with the title company is crucial.
If you have questions please reach out to us at lexicontitle.com