RECORDATION TAX REDUCTION

Comprehensive guide to DC’s reduced recordation tax benefit for first-time homebuyers

How to qualify

District of Columbia lawmakers designed the Reduced Recordation Tax Rate benefit to ease the tax burden for first-time homebuyers who qualify.

Under the reduction benefit, the recordation tax paid at settlement for houses and condos is reduced to 0.725%. (Transfer taxes paid by the seller remain unchanged at 1.1% or 1.45% depending on the sales price.)

To receive the recordation tax reduction benefit, your title company will file an application with the Office of Tax and Revenue at closing. To do so, they will require you to provide the proper documentation showing you satisfy the property and household income requirements and that you meet the criteria of a DC first-time homebuyer.

Household income and purchase price thresholds change from time to time, but we do our best to keep our information on DC Reduced Recordation Tax Rate benefit up to date.

Information deemed accurate but not guaranteed. Updated 5 October 2021.

Property Eligibility

The maximum sales price cannot exceed $658,500.

To be eligible, a property must also qualify for DC’s Homestead Deduction. The reduced rate will not be available to property that fails to qualify, and appropriate additional tax may be imposed.

Household Income

The income limits to qualify for Reduced Recordation Tax Rate for DC first-time homebuyers are as follows:

  • Persons in household
    Household income limits
    1.
    $162,540
    2.
    $185,760
    3.
    $208,980
    4.
    $232,200
    5.
    $250,920
    6.
    $269,460
    7.
    $288,000
    8.
    $306,540

All individuals listed on the deed, whether residing in the property or not, plus individuals not listed on the deed who reside or will reside in the property will have to provide a copy of their U.S. Individual Tax Return (Form 1040) that was filed immediately prior to closing and recording of the deed.

Tenants occupying a separate dwelling unit under a written lease and individuals under age 18 do not count toward income limits.

Required Documentation

Be sure your Reduced Recordation Tax Rate application packet contains the following:

  • (a) Copy of the Settlement Statement or Closing Disclosure Form
  • (b) Copy of the DC Homestead Deduction application
  • (c) Copy of each applicant’s entire U.S. Individual Income Tax Return (Form 1040) filed immediately before closing and recording of the deed
  • (d) Additional documentation may be required if the applicant previously owned a property in DC with an ex-spouse but is now divorced or separated, or if the Recorder of Deeds deems it necessary for an audit of the application.

DC Reduced Recordation Tax Rate Application

Download a copy »

FAQs

How does DC define a first-time homebuyer?

A “DC first-time homebuyer” is defined as an individual purchaser who has never owned eligible property as the individual’s principal residence. DC Official Code § 42-1101(16). The term also includes an individual who has divorced or separated and who, by a written settlement agreement or court order, did not obtain an ownership interest in a principal residence that had previously been jointly owned. In order for a deed to qualify for the reduced rate, each grantee named in the deed must be a first-time District homebuyer.

Do I have to be a DC resident to qualify?

You must be domiciled in the District of Columbia or have plans to immediately reside in the District of Columbia.

Can I share the recordation reduction benefit with the seller?

No. Applicants are eligible for the reduced rate of tax only if the entire benefit of tax reduction is allocated to the qualifying homebuyer(s) listed on the deed. The seller(s) must pay their transfer tax due on the sale of the property.

I previously owned a home in DC with an ex-spouse. Does this preclude me from qualifying for the reduced recordation tax rate benefit?

If your only prior ownership of real property as the principal place of residence in DC was a join ownership with an ex-spouse to whom you are now separated or divorced, you may still qualify for the benefit.

You will have to submit a copy of a written separation agreement or court order showing you’ve relinquished ownership of the real property to the ex-spouse.

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Closing Costs Explained…

Closing costs include taxes, lender fees and title fees that a homebuyer pays at settlement. Watch this video to prepare for the process.