The cost of buying a home in Montgomery County to increase Sept. 1
Despite protests from the local real estate community, the Montgomery County Council last week unanimously approved an increase to the recordation tax, paid by homebuyers and sellers at closing, as a way to pay for school construction.
The recordation tax rate will now increase for the first $500K from $6.90/$1,000 to $8.90/$1,000 and for amounts above $500K from $10/$1,000 to $13.50/$1,000, a "pretty significant increase said County Council President Nancy Floreen who proposed the bill.
Put another way, a property purchased for $400,000 under the old tax rate would carry a recordation tax of $2,415 split between the buyer and seller. Under the new rate, the recordation tax will be $2,670, an increase of $255. A property purchased for $700,000 will see an increase of $1,155 in recordation taxes. A property purchased for $1,000,000 will cost an additional $2,205 in recordation taxes.
The median sales price in Montgomery County was approximately $411,000 last April, up 1 percent from a year ago.
Initially the tax increase was slated to take effect July 1, but the Council pushed it back to Sept. 1 amid protests from the real estate community who said they need more time to adjust to the change. The Council also opted to increase the county’s principal residence exemption from the first $50,000 to the first $100,000 in response to industry concerns.
Those in favor of the tax increase, such as the county’s Board of Education and the PTA, said funding increases for schools have not kept pace with growing enrollment. Montgomery County Public Schools is adding around 2,500 new students per year.
Those opposed to the tax increase said the financial burden was being unfairly placed upon a small subset of the county’s population. Roughly 13,000 units are bought and sold each year in Maryland’s most populous county that is home to over 1,000,000 residents. They also said increasing the recordation tax unfairly affects first-time homebuyers and elderly residents.
In the near future, the Council will examine ways to ease real estate tax burdens for senior citizens. They are also contemplating a 6 to 9 percent increase in property taxes.
Check back for updates as we hear more from County Council.
- Tags: Homebuying | Legislation | Maryland | Montgomery County | Real Estate | Taxes | Transfer or Recordation