What are Transfer and Recordation Taxes?
Transfer and Recordation taxes are taxes collected by the State of Maryland and the local jurisdictions upon recording of deeds and mortgages in the land records. Basically, it is sales tax on real estate. Unfortunately, Maryland does have substantial tax rates. On all purchases, there are three separate potential taxes to be paid in order to record a deed.1) State Transfer Tax
This tax is uniform throughout the entire State. 1/2% of the purchase price. Note that there is an exemption for First Time Maryland Homebuyers.2) County/City Transfer Taxes
This tax varies by county and is also based on the purchase price. The sale price times the tax rate equals the amount due.3) Recordation Tax
This tax also varies by county and is also based on the purchase price. The sale price times the tax rate equals the amount due. Recordation tax can also be due on a refinance. The tax is computed as the tax rate times the loan amount. There is an exemption on this tax up to the amount of money being paid off provided the property is your principal residence and you were one of the original borrowers on the money being paid off.Who pays the transfer and recordation taxes?
In Maryland, on an existing home resale, it is customary for the transfer and recordation taxes to be split evenly between the buyer and seller. (But not required to be split) On a the sale of a new home from a builder, it is customary (but not required) for the buyer to pay all of the transfer and recordation taxes (subject to the "First Time Maryland Homebuyers" exemption).What is the exemption for "First Time Maryland Homebuyers"?
If you are a "First Time Maryland Homebuyer" then 1/2 of the State Transfer Tax is exempt. The other 1/2 must by law be paid by the seller.Who is a "First Time Maryland Homebuyer"?
If you have never owned a principal residence in the State of Maryland before, you qualify. Even if you have previously or currently own a principal residence property in another state you still qualify. Never owned does mean never. There is no exemption available if you have not owned a home recently. However, if you have owned real estate in Maryland which was never used as your principal residence, you are still eligible for this exemption.Exemptions - Several Counties have some partial exemptions available for the County Transfer Tax and/or Recordation Tax depending on a variety of factors.