DC offers reduced recordation tax for first-time homebuyers

It took a while to get this done but as of October, DC now has a first-time homebuyer incentive on the books. They do this by reducing the recordation tax (the tax on the new deed) paid by the buyer.

For deeds recorded on or after October 1, 2017, the recordation tax rate for a “first-time District homebuyer” purchasing “eligible property” will be reduced. For houses and condominium units, the recordation tax rate is 0.725% (transfer taxes owed by the seller of 1.1% or 1.45% are unchanged). For transfers of economic interests in a housing cooperative unit (co-op unit), the recordation tax rate is reduced from 2.2% to 1.825% for units under $400,000, and from 2.9% to 2.175% for units $400,000 or greater (there is no transfer tax). An application for the reduced rate must be made at the time the deed is offered for recordation. The reduced rate cannot be applied for after the deed is recorded.

You noticed the “” marks in the above paragraph.

“First-time District homebuyer” — To be eligible for the reduced rate of tax, the buyer must be a District resident or intend to immediately become a District resident at the time the deed is offered for recordation and also never owned a house, a condominium unit or an economic interest in a co-op unit that qualified for the District’s homestead deduction as the applicant’s principal place of residence. Nevertheless, an applicant can still qualify as a “first-time District Homebuyer” if the applicant’s only such prior residence was jointly owned with an ex-spouse from whom the applicant is divorced or separated and the applicant relinquished ownership under a court order or a separation agreement.

An “eligible property” is essentially a residential property including condos and co-ops.

Not every first-time homebuyer will qualify for the reduced recordation tax. There are also income requirements… this part of the equation gets pretty complicated because the City will take into account not only the grantee/buyer income but also the incomes of non-grantees who will reside in the property.

Documentary evidence is required when claiming the reduction so be sure you qualify or your deed will not be accepted for recording until the proper transfer taxes are paid.