BCCDC Real Estate by Marcie Sandalow

Montgomery County- Transfer & Recordation Taxes

said on November 28th, 2010 filed under: Information for Buyers, Information for Sellers

bigstock_Crunching_The_Numbers_On_The_C_1192847Making your way through a HUD-1 at settlement always feels a little rushed.  As a real estate agent, I’m used to it.  But if you’re only buying and selling a couple of houses in your lifetime, it’s not a regular event, and can lead to some head scratching.  And the way the new HUD-1 sheets are figured can make even the most astute real estate agent a little fuzzy when it comes to explaining what is what. I recently had such a moment when the subject of transfer and recordation taxes came up.

In Montgomery County, MD, transfer and recordation taxes for purchases are found on lines 1203, 1204, 1205 and 1206 on the HUD-1.  Line 1203 is for the purchaser, and lines 1204-6 are for the seller.  Typically, these taxes are split evenly between the buyer and the seller. The one exception is for first-time Maryland homebuyers.  Their portion of the state transfer tax is waived by the state (think of it as a gift).  It is not paid by the seller.

Taxes are figured like so:

  • Recordation Tax:  $6.90 per thousand*
  • Recordation Tax:  $10.00 per thousand on amounts over $500,000
    *the first $50,000 used to calculate the recordation tax is exempt if the property is owner occupied
  • State Transfer Tax: 0.5%
  • County Transfer Tax: 1.0%

The typical purchase price on a 3-bedroom brick colonial in my neighborhood of East Bethesda runs around $725,000.  This is how the taxes would figure for such a house:

$6.90 x 450 (remember… it’s 500K less 50K) = $3,105
$10.00 x 225 (the thousands above 500K) = $2,250
These two figures added together = the total Recordation Tax = $5,355
State Transfer Tax= 0.5% x $725,000 = $3,625
County Transfer Tax = 1.0% x $725,000 = $7,250

$5,355 + $3,625 + $7,250 = $16,230 ÷ 2 = $8,115 (remember, taxes are typically split 50/50). The total tax comes to roughly 1.1% of the purchase price for both the buyer and the seller.

If you are a first time Maryland homebuyer the state of Maryland will waive the buyer’s portion of the state transfer tax.  The buyer will save $1,812.50 in this equation, with a total tax obligation of $6,302.50.  This sum will show up on line 1203 of the HUD-1.

The seller can expect to see $2,677.50 on line 1206/State recordation tax, $1,812.50 on line 1205/State tax stamps, and $3,625 on line 1204/City/County tax stamps (for a total of $8,115).

Confused yet?

If I can help you find a house to buy so you can become a tax payer, give me a call!

And click on the link if you’re curious about DC transfer & recordation taxes.

posted by Marcie Sandalow

  1. Rihouey Franck

    Hi,

    I’m about to purchase a property in Potomac,md.The sales price is 650,000 (Land only).Do i get a taxe waive on LAnd purchase?
    The seller wants me to pay all transfer Taxes,i will be first time Home Buyer.WE plan to start building right away(if it make any difference.
    Thx for your time.
    Franck

  2. marciesandalow

    Franck-
    I wasn’t really sure how to answer your question, so I talked to my favorite settlement attorney, Tom Muldoon of Counselors Title. His reply:

    “There is no waiver of taxes for a land purchase, in fact, it’s not certain they will qualify as a MD First-time Home Buyer. In these instances we would have to escrow the amount waived by the State as a MD FTHB to see if they would accept the recording without the payment of the tax.”

    Don’t know if this helps, but hope so! Good luck.

  3. Wayne

    Hi Marcie, can your settlement company Counselors Title, give me an estimate of their fees and my costs on “taxes” for a purchase of 1,189,000 in montgomery county.
    I am a FTHB in MD. Seller accepts all taxes split equally between us.
    Thank you,

  4. marciesandalow

    Jeff-
    Counselors Title has a page on their web-site that you can utilize: http://www.ctitle.net/resources/calculating-closing-costs.
    I also like the calculator at http://www.paragontitle.com
    Lastly, talk to your settlement attorney. They can work up a fairly accurate estimate.
    Best of luck. -Marcie

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