Transfer & Recordation Taxes in Montgomery County, MD

Original Source:  Montgomery County- Transfer & Recordation Taxes

Making 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.

The exception to this equation is when the purchaser is a first time Maryland homebuyer. When this is the case, the state of Maryland will waive the buyers 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.

Confused yet?