DC’s Newly Enacted First-Time Homebuyers Recordation Tax Reduction
Here's Information on Qualifying
While we are all pleased with the DC City Council’s decision to provide some relief for first-time homebuyers, this enactment is not without its complications and nuances. Qualifying is not as simple as Maryland’s first-time homebuyer exemption; whereby, each homebuyer must simply be a first-time homebuyer of a principal residence to qualify. No, this enactment also imposes a few additional hurdles, including purchase price limitations and limits on household income.
In general, the recordation tax will be reduced to .725% if:
- Each grantee (i.e., homebuyer taking title) has never owned a principal residence in the District.
- The property is improved residential property and qualifies for the DC Homestead Deduction. Note: Be careful here. Qualifying for the DC Homestead Deduction is not simply a statement provided by the homebuyer(s) that they will occupy the property as a principal residence – read more.
- The purchase price can't exceed $625,000.00. Note: This purchase price threshold may be subject to an annual adjustment.
- Total Household Income can't exceed defined thresholds - view here.
- As a further complication, since the enactment only applies to real property that qualifies for the homestead deduction, this means that the reduction would not apply to the value of unimproved lots (e.g., condo parking spaces or out-lots). For transactions involving unimproved lots, this may require sales contracts to specify an apportioned value (not simply total purchase price) for both the homestead deduction qualifying lot, as well as, the non-qualifying lot. In other words, the full recordation tax of either 1.1% or 1.4% would be assessed on the value of the lot that does not qualify for the homestead deduction. Stay tuned for our future communication on this little wrinkle.