Understanding Washington D.C.’s Transfer Tax: A Quick Guide

What are the types of transfer taxes?

Washington, D.C., has two main types of transfer taxes: a deed recordation tax and a deed transfer tax. Both are assessed based on the overall value of the property at the time of the sale.

Deed Recordation Tax

• Applicability: Applies to the recording of all deeds to real estate in Washington, D.C.
• Basis: Value of consideration given for the property or fair market value if the consideration is nominal or non-existent.
• Current Tax Rate:
  • 1.1% of consideration or fair market value for residential property transfers less than $400,000.
  • 1.45% of consideration or fair market value on the entire amount for transfers greater than $400,000.
• Note: For residential properties under $400,000, the rate is 1.1% of consideration or fair market value.

Deed Transfer Tax

• Applicability: Applies to each transfer of real property when the deed is submitted for recordation.
• Basis: Consideration paid for the transfer or fair market value if the consideration is nominal or non-existent.
• Current Tax Rate:
  • 1.1% of consideration or fair market value for residential property transfers less than $400,000.
  • 1.45% of consideration or fair market value on the entire amount for transfers greater than $400,000.
• Note: For residential properties under $400,000, the rate is 1.1% of consideration or fair market value.

Other transfer fees

In addition to transfer taxes, there are possible fees to consider, such as from a homeowner’s association or another local neighborhood organization. Again, as these can vary heavily based on location, it’s important to consult a professional.

If you’re selling your home for sale by owner, consulting a professional might help with some of the finer points of the process and give you a better idea of what you can expect.

Are transfer taxes deductible?

Unfortunately, transfer taxes are not deductible on your income tax return. However, there is a strategy to possibly lower your capital gains tax liability. Capital gains are the profits made from selling your home, and these are subject to federal taxation, just like other asset sales.

The IRS allows sellers to include transfer taxes as part of their selling costs. By treating transfer taxes as selling costs, you can deduct these expenses from the total sale price of your home. This effectively reduces your taxable capital gains, helping to minimize the tax you owe on the profit from your home sale.

Transfer tax exemptions

In Washington, D.C., some sellers may qualify for exemptions from transfer taxes. These exemptions include:

• Transfers by the federal or D.C. governments.
• Transfers by organizations with valid property tax exemptions.
• Transfers between family members or domestic partners without actual consideration.
• Deeds releasing property used as security for a debt.
• Transfers securing a debt or obligation.
• Transfers confirming, correcting, or modifying a previously recorded transfer.
• Transfers to lower-income homeownership households, nonprofit housing organizations, or cooperative housing associations.
• Transfers involving revocable trusts where the transferor is the current beneficiary or named beneficiary due to the grantor’s death.
• Transfers to resident management corporations.

Estimating transfer taxes for your home sale

For a quick estimation of your net proceeds from selling your Washington D.C. home, try HomeLight’s Net Proceeds Calculator. This tool accounts for closing costs, including transfer taxes, agent fees, and any renovations, providing you with a clear picture of your potential financial outcome.

For a more accurate assessment of transfer taxes and other closing expenses, it’s wise to consult with a top real estate agent. They can help you understand and possibly negotiate these costs. While transfer taxes are often considered the responsibility of either the buyer or seller, the specifics can vary based on the market and the terms of your sale.

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