Washington DC imposes two distinct taxes on real estate transfers: the Recordation Tax and the Transfer Tax. Both apply to the same transaction, and the combined rate makes DC one of the most expensive closing cost markets on the East Coast. Understanding which is which — and who pays each — is essential.
Both taxes are CLIFF taxes — a $400,000 sale is taxed at 2.2% total ($8,800 combined). A $400,001 sale is taxed at 2.9% on the FULL AMOUNT ($11,600) — a $2,800 jump from a $1 price increase.
The recordation tax is technically the buyer's cost; the transfer tax is the seller's. But this is customary — the contract can allocate differently.
DC real estate also has mortgage recordation tax (0.726% of loan amount) if financing — this is a SEPARATE fee paid on top of the deed taxes.
First-time DC homebuyers who use the property as a primary residence may qualify for an exemption from the recordation tax — a significant saving on a typical DC home.
Both are taxes on real estate transfers but are technically distinct. The recordation tax is levied when the deed is recorded at the DC Office of Recorder of Deeds, and is typically paid by the buyer. The transfer tax is levied on the grantor (seller) at the time of transfer. In practice, both apply to every sale and are usually paid by their respective parties at closing.
Yes. DC offers a recordation tax exemption for first-time homebuyers who purchase a property to use as their primary residence and whose household income is below DC's AMI limits. This can save thousands of dollars. Confirm current income limits with the DC Office of Tax and Revenue.
Yes. Developer-to-buyer transfers of new construction in DC are subject to the same recordation and transfer taxes as resale transactions.
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