Below are the most recent (October 2019) requirements to qualify for a recordation tax reduction:
- The purchase price can’t exceed $647,000.
- Total household income doesn’t exceed the below thresholds:
|Persons In Household||Household Income Limits|
- Each grantee (i.e., homebuyer taking title) has never owned a principal residence in the District.
- The property is improved residential property and qualifies for the DC Homestead Deduction. Note: Be careful here. Qualifying for the DC Homestead Deduction is not simply a statement provided by the homebuyer(s) that they will occupy the property as a principal residence.
- As a further complication, since the enactment only applies to real property that qualifies for the homestead deduction, this means that the reduction would not apply to the value of unimproved lots (e.g., condo parking spaces or out-lots). For transactions involving unimproved lots, this may require sales contracts to specify an apportioned value (not simply total purchase price) for both the homestead deduction qualifying lot, as well as, the non-qualifying lot. In other words, the full recordation tax of either 1.1% or 1.45% would be assessed on the value of the lot that does not qualify for the homestead deduction.
What is the DC First-Time Homebuyer Recordation Tax Reduction?
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).https://otr.cfo.dc.gov/sites/default/files/dc/sites/otr/publication/attachments/ROD-11-Form.pdf
Who Is A DC First-Time Homebuyer?
To be eligible for the reduced rate of tax, the applicant must be a “first- time District homebuyer”. This means that the applicant has 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.https://otr.cfo.dc.gov/sites/default/files/dc/sites/otr/publication/attachments/ROD-11-Form.pdf
For more information, please see the Office of Tax and Revenue’s page.