Buying or selling in DC and confused by those transfer and recordation taxes on your closing sheet? You are not alone. These line items can be significant, and knowing who pays and how they are calculated helps you plan with confidence. In this guide, you will learn what each tax is, typical DC norms for who pays, simple ways to estimate costs, and strategy tips to keep your budget on track. Let’s dive in.
What these taxes are
Transfer tax is a District tax on the transfer of real property ownership. It is typically calculated on the sale price and collected at closing. Recordation tax is a District tax charged when documents such as the deed and, if applicable, the mortgage are recorded in the land records. Both are revenue taxes for the District and are separate from title insurance, lender fees, and other closing costs.
The DC Office of Tax and Revenue and the Recorder of Deeds oversee these taxes. Your title or settlement company calculates the exact amounts and remits the funds at closing when documents are recorded.
Who typically pays in DC
Allocation is negotiable in your purchase contract, but here is the common DC practice:
- Seller typically pays the real property transfer tax.
- Buyer typically pays the recordation tax and any mortgage-related recordation component when financing.
You can negotiate different terms. For example, parties may split taxes or apply a seller credit to offset the buyer’s costs. Always confirm the allocation in your signed contract.
How to calculate your taxes
At a high level, these formulas apply:
- Transfer tax = Sale price × transfer tax rate.
- Recordation tax = Sale price × recordation tax rate, or mortgage amount × mortgage-recordation rate if assessed on the loan.
Your closing statement may also include flat administrative recording fees for the deed and mortgage. These are separate from the taxes. Exact rates and any exemptions should be confirmed with your title company and the DC Office of Tax and Revenue before you finalize your budget.
Quick examples using common DC prices
Rates and exemptions can change. The following are simple illustrations using example percentages. Replace the example rates with the current DC rates provided by your title company before relying on the numbers.
- Assumed example rates for illustration only:
- Transfer tax (seller): 1.10% of sale price
- Recordation tax (buyer): 1.45% of sale price or mortgage amount
Example 1: DC condo at $450,000
- Seller transfer tax at 1.10%: $4,950
- Buyer recordation tax at 1.45%: $6,525
- Combined illustrative taxes: $11,475
Example 2: DC rowhouse at $850,000
- Seller transfer tax at 1.10%: $9,350
- Buyer recordation tax at 1.45%: $12,325
- Combined illustrative taxes: $21,675
Example 3: Higher-price home at $1,400,000
- Seller transfer tax at 1.10%: $15,400
- Buyer recordation tax at 1.45%: $20,300
- Combined illustrative taxes: $35,700
These examples show how the taxes impact a seller’s net proceeds and a buyer’s cash to close. Your title company will run exact numbers for your address, price, and loan.
Exemptions and special cases to check
You may qualify for relief, but programs change and documentation is required at closing. Ask your title company and lender early about:
- First-time homebuyer or principal-residence credits that may reduce recordation tax.
- Transfers between spouses, transfers incident to divorce, and transfers to a revocable trust.
- Transactions with government, qualified nonprofits, or affordable housing entities.
Each program has specific eligibility rules and forms. Confirm what applies to your situation well before closing.
How and when these taxes are paid
Your title or settlement company calculates the taxes as part of the closing statement. The funds are collected at settlement and remitted to the District when the deed and, if applicable, the mortgage are recorded. If a deed or mortgage is corrected or recorded after closing, additional fees or penalties may apply.
If you are assuming an existing loan, using seller financing, or buying a co-op or commercial property, the calculation method may differ. Title counsel will advise on the correct approach for your transaction.
Strategy and negotiation tips
- Treat allocation as a lever. In some markets, sellers offer a credit to offset the buyer’s recordation tax. In others, buyers agree to pay more of the taxes to win a competitive bid.
- Run two net sheets. Sellers should review a net sheet with standard allocation and a second showing potential credits to the buyer, so you can weigh pricing and negotiation tradeoffs.
- Raise first-time buyer relief early. If you might qualify, start the documentation process right away so the title company can apply the benefit at closing.
- Get a preliminary closing statement. Ask your title company for an estimate soon after ratification to set expectations and reduce surprises.
Budgeting checklist
Use this quick list to stay organized:
- Confirm current transfer and recordation rates with your title company and the DC Office of Tax and Revenue.
- Ask your lender whether any costs can be paid through lender credits and how that affects your loan terms.
- Add transfer and recordation tax lines to your buyer or seller net sheet, along with title, lender, and prepaid items.
- Decide on allocation strategy and any credits before finalizing contract terms.
- Gather documentation for any exemptions or credits and deliver to title well before closing.
- Review your final settlement statement carefully and ask questions before you sign.
Common pitfalls to avoid
- Assuming taxes can always be financed. Some lenders allow certain costs to be offset by credits, but taxes tied to the mortgage amount can affect loan qualification. Confirm with your lender.
- Not clarifying who pays. If the contract is silent or unclear, you can end up with last-minute disputes. Spell out allocation in writing.
- Treating condos, co-ops, and commercial the same. Co-op and commercial transactions may follow different rules or rates. Verify treatment for your property type.
- Expecting easy refunds. If recording does not occur or is reversed, refund rules are narrow and time-sensitive. Speak with your title company promptly.
What to do next
You do not need to memorize the tax code. You just need a clear plan and the right team. Confirm today’s rates with your title company, decide on allocation in your contract, and build your net sheet with accurate numbers. If you want help modeling scenarios or negotiating credits to meet your goals, connect with The Agency DC for tailored guidance.
FAQs
What are DC transfer and recordation taxes?
- They are District taxes collected at closing: transfer tax on the property transfer and recordation tax when documents like the deed and mortgage are recorded.
In DC, who usually pays these taxes in a sale?
- Common practice is seller pays transfer tax and buyer pays recordation tax, but allocation is negotiable and should be confirmed in the contract.
How do I estimate recordation tax if I am financing?
- It may be based on the sale price or the loan amount; ask your title company which applies to your loan and use their current rate to calculate.
Do first-time homebuyers in DC get recordation tax relief?
- Some programs may reduce or relieve recordation taxes for eligible first-time buyers, but you must qualify and submit documentation at closing.
How can I verify the current DC tax rates before closing?
- Check with your title company and the DC Office of Tax and Revenue for the latest rates, exemptions, and required forms.
