by Nate Ward
on Wednesday, June 28th, 2017 at 1:49pm.
The District of Columbia Association of REALTORS®(DCAR) announced the First-Time Homebuyer Tax Benefit has been passed and funded by the DC Council. The First-Time Homebuyer Tax Benefit allows first time home buyers in DC to pay a .725% recordation tax on homes no more than $625,000 that earn less that 180% AMI beginning this October.
So what exactly does that mean?
First let’s talk about the recordation tax. Recordation tax is part of various closing costs and based on the purchase price. If the sale price is $399,999 or less than the DC transfer and recordation tax rate is 1.1%. Sales of $400,000 and above are taxed at the rate of 1.45%. For example, if you bought a $250,000 home in DC, the buyer and seller would each pay $2,750 in DC transfer and recordation tax. A $500,000 home purchase would require $7,250 from both the buyer and seller. With the First-Time Homebuyer Tax Benefit in effect, first-time homebuyers in DC will pay only a tax of .725% if the price of the home is no more than $625,000.
AMI or the area median income in DC for 2016 is $108,600. This means that in order to qualify for the First-Time Homebuyer Tax Benefit, your income needs to be less than 180% of the AMI. In other words, for a single-occupant household, you must earn less than $136,800 in order to qualify.