Closing costs complicated in Montgomery County, Maryland

Written by Todd Ewing Wednesday, 16 January 2013

County transfer taxes plus state transfer & recordation taxes make Montgomery County a tricky place to buy real estate

Closing costs in Montgomery County, Maryland – both in terms of the required complex calculations and the high rates – may be the most unfriendly jurisdiction to home buyers and sellers compared to all other jurisdictions in the country.

Most homebuyers and sellers can very easily determine their closing costs for government transfer taxes by simply multiplying a base factor of say 1% or .05% against their contract purchase price. However, in Montgomery County, Maryland, a multitude of factors come into play when calculating this biggest chunk of closing costs.

At the time of closing on a Montgomery County, Maryland purchase transaction, the three different taxes imposed and generally split evenly between the buyer and the seller are:

  1. County Transfer Tax
  2. State Transfer Tax
  3. State Recordation Tax

As a guide, I have identified each tax below with the respective rates and associated variables. Or if you want to make it easy on yourself, I suggest using our Quick Quote which accounts for all these factors and variables with a few easy questions.

County transfer tax

This tax is imposed at 1% of the purchase price (or total consideration) and customarily split 50/50 between buyer and seller. Thus, typically, the buyer pays .05% and the seller pays .05%.

State transfer tax

This tax is imposed at .05% of the purchase price and customarily split 50/50 between buyer and seller. Thus, typically, the buyer pays .025% and the seller pays .025%. However, if the homebuyer is a Maryland first-time homebuyer, then the buyer is exempt from paying her portion but the seller still must pay the .025%.

State recordation tax

This tax is imposed at .069% on the first $500,000 of the purchase price plus an additional .1% on the amount of purchase price exceeding $500,000. This tax is also customarily split 50/50 between the buyer and the seller.

However, if the homebuyer will be occupying the property as a principal residence, then the first $50,000 of the purchase price is exempt from this tax, which means the tax is imposed at .069% on the first $450,000 of the purchase price.

Further, an additional .069% is imposed on the loan amount of $500,000 or less (in most cases a construction loan) to the extent it exceeds the purchase price or 1% on the loan amount over $500,000.00 to the extent it exceeds the purchase price.

About the Author

Todd Ewing

Todd Ewing

Todd Ewing founded Federal Title & Escrow Company in 1996. He's also a partner with the law firm Tobin, O'Connor & Ewing and co-founder of closingquotes.com, the first online marketplace in the U.S. for real estate closings. 

He received his law degree from Drake University Law School and his undergraduate degree from Iowa State University. Mr. Ewing has practiced real estate law in the DC metro area since 1991 and he's a member of the DC Bar and Maryland & Virginia Land Title Associations. 

Comments (1)

  • jane rice

    jane rice

    26 July 2014 at 14:31 |
    Your article leaves me confused as to whether you are using percents or fractions. if its 1% tax then it is not split 0.05% by buyer and seller (unless someone else is paying the other 0.9%, so please correct thoughout so someone can understand how much tax is due. Do you mean 0.05%, which would be 0.005 as a fraction of the cost of the house for the state transfer tax? please clarify and give an example for $ 500,000 house.

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