First time buyer potential tax savings on closing costs:
DC: .375% to .725 of purchase price
MD: .25% of purchase price.
In Maryland, home buyers who’ve never owned real estate in the state and are buying a primary residence are exempt from the state transfer tax, which saves .25% of the purchase price in closing costs.
In DC, the DC recordation tax rate is reduced to eligible buyers* to .725%. This is a .375% or .725% decrease in the transfer tax for other purchasers. The previous transfer tax would otherwise be 1.1% for purchases below $400,000 versus 1.45% for purchases $400,000 and above.
So on a $500,000 purchase price, this is a savings of $3625 in closing costs.
*The fine print for the program is spelled out here.
*But the key requirements are:
- The purchaser must be buying their first home in the District of Columbia. It is OK for a buyer to have owned outside DC.
- The property must be a principal residence and buyer must qualify for the homestead deduction.
- The buyer must document that they meet household income limits. Income from all sources is counted, and is calculated based off the adjusted gross income from the last filed tax return (line 8b).
Income limits by household size, as of October 1 2022:
The maximum purchase price is $684,500.
Here is a link to the application for the reduced recordation tax for first-time homebuyers.
Virginia does not have a transfer tax reduction for first time buyers, but the transfer tax rate in Virginia is lower than DC & MD anyway, as it is .33% of the purchase price and additionally .33% of the loan amount.
To proceed, pre-qualify now at: https://ajaffe.gofirsthome.com/startapp
Questions? firstname.lastname@example.org 240 – 479 – 7658