How to Save Thousands in Closing Costs

Whatever your thoughts may be about the Trump tax overhaul, we can all agree that DC’s recent change to the recordation tax is a winner for folks buying their first DC home. Of course there are certain requirements that must be met to qualify, but the savings are real…about $3,600 on a $500,000 home.


What’s This All About?
A buyer typically pays about 3% of the purchase price to cover closing costs, which consists of taxes and fees paid to the city, lender, and the title company. DC charges a Recordation Tax of 1.1% of the purchase price on homes under $399,999 and 1.45% on homes above $400,000. However, as of October 1, 2017 the new recordation tax is reduced to 0.725% for those who qualify.

Who Qualifies?
• Must be purchasing a residential property in DC as your primary residence
• Must have never owned a property in DC
• Purchase price must be below $625,000
• Income restricted to $139,140 for one person and $158,940 for two people
• Submit an application for the DC Homestead Tax Exemption, which will also knock about $600 off your annual property tax bill

What’s the Catch?
You have to apply for the tax break! Sadly, I’ve heard too many horror stories of buyers who were never made aware of the program, so be sure to work with an experienced real estate agent.

Source: https://otr.cfo.dc.gov/publication/otr-tax-notice-2017-07-reduced-recordation-tax-rate-first-time-homebuyers
 

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First-Time Homebuyer Reduced Recordation Tax

The First-Time Homebuyer Reduced Recordation Tax officially goes into effect on October 1, 2017. It significantly reduces the recordation tax for qualified DC homebuyers, from 1.45% to 0.725%. This will save those looking to plant their roots in the District thousands of dollars at the time of purchase.

Qualifications

• The buyers must either be DC residents or intend to become DC residents with the prospective purchase.
• The buyers must not earn more than 180% of the Area Median Income (AMI).
• The home must not have a purchase price exceeding $625,000, adjusted annually for inflation.

View Application HERE