If you are going to buy – or sell – your residential property in the District of Columbia, and if settlement will take place after December 31, 2002, be prepared to pay a lot more to the District for the privilege of recording the deed onto the land records of the District.

Effective January 1, 2003, the Recordation and Transfer tax will rise from 1.1 percent to 1.5 percent for all properties where the consideration – purchase price – is over $250,000.

Currently, in order to record a deed from Seller to Buyer (also called Grantor to Grantee), the District imposes a l.1 percent transfer tax and a 1.1 percent recordation tax. Thus, if you purchase your home for $300,000, the District must receive $6,600 ($300,000 x 2.2%) before it will allow the deed to be recorded among its land records.

However, if settlement will take place after the end of this year, the District will require a whopping $9,000 ($300,000 x 3%) in order to record the deed. The District Government is currently facing a $323 million budget shortfall. Accordingly, the District City Council felt the need to raise revenues from all sources, and obviously real estate has always been an easy target – especially in todays market where property prices have risen at extraordinary proportions.

Typically, this Recordation and Transfer tax is split equally between buyer and seller, although this split is not mandatory. As with everything in real estate, the payment of these taxes is negotiable. And since many homebuyers – especially first timers – may be squeezed out of the market by the high price of homes, it is predicted that sellers may end up bearing the brunt of these tax increases. There is also the possibility that this increase in the recordation-transfer tax may effectively bar a lot of homebuyers from being eligible to obtain a mortgage loan.

When the City Council was first considering increasing these real estate taxes, there was an exemption for first time home purchases. However, the final version of the law does not contain any such exclusion. All homebuyers for property sold over the price of $250,000 will be subject to this new increase.

If the property costs $250,000 or less, the old rates of 1.1 % for the recordation and 1.1% for the transfer tax (i.e. a total of 2.2%) will still apply, but only on the following conditions:

Published: December 9, 2002

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