Before purchasing a house in DC it is important to know that you don’t just pay the price you settle on you also pay additional fees known as closing costs. It doesn’t stop there! Once you own the property you will also pay property tax!
CLOSING COSTS: Transfer / Recordation Taxes
In DC closing costs typically average 3% of the total transaction price. If you are purchasing a $500,000 home you will pay close to $15,000 in closing costs. Closing costs break down into a variety of items but on of the biggest ticket items is the DC Transfer / Recordation tax. Typically the buyer payers the recordation tax and the seller pays the transfer tax. In some instances the buyer will be required to pay for both which is RIDICULOUS! Below is a quick break down of how much these taxes will run you at closing
* Transactions $399,999 and under are taxed at the rate of 1.1% of the purchase price. Example: $300,000 x 1.1% = $3,300. So the buyer and seller would each pay $3,300 for a total of $6,600 paid to DC.
* Transactions $400,000 and above are taxed at the rate of 1.45% of the purchase price. Example: $500,000 x 1.45% = $7,250. So the buyer and seller would each pay $7,250 for a total of $14,500 paid to DC.
Its important to recognize the difference in rate especially when a house is listed at $400,000 or slightly above. It benefits both parties for that price to be at $399,999. Oh by the way…..if you think this is high you are correct. DC has some of the highest transfer taxes in the metro area, but we also have the lowest property tax rate. If you plan to stay in the same DC home for a long time you will definitely save!
Yes, they suck. I get it!!! But this is the only way the city can continue to improve and BTW we have the lowest rate in the area! This is a pretty easy thing to explain so here we go:
* Taxes due on 3/31 for the period of 10/1 – 3/31.
* Taxes due on 9/30 for the period of 4/1 – 9/30.
The tax rate in DC is $.85 per $100 of assessed value. If your property is assessed at $500,000 then your annual tax bill will cost $4,250 or two payments of $2,125. If you are not currently receiving the HOMESTEAD DEDUCTION then make sure you get on that right away! It reduces your assessment by $67,500. So the $4,250 tax bill was just reduced to $3,676.25. To learn more about the Homestead Deduction click here. To see if your property is currently receiving the credit you can click here and search for your address.