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Taxes Are About to Go Up for Washington D.C. Home Buyers
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Today I’m here with a public service announcement about the upcoming tax increases for Montgomery County, specifically for the county transfer tax. Anything settled after September 1st is subject to these fees whether you are the primary resident or an investor.
To clarify, these tax increases don’t apply to homes under contract; this is for actual settlements. If you are looking to buy something and you want to get in before these deadlines, you need to act very quickly and be under contract in the next week or two.
What are these increases and how will they impact your bottom line? Let’s say you bought a $575,000 home. Under the old county tax fees, $50,000 would be exempted from the first $500,000 of value if the property is your principal residence. The next $450,000 would be taxed at $6.90/$1,000, which would add up to $3,105. The additional $75,000 would be taxed at $10.00/$1,000, which would give you another $750. All told, you would pay $3,855 in taxes.
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The county transfer tax increase takes effect on September 1st.
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Under the new rules for that same $575,000 property, you will get a $100,000 exemption off the first $500,000 of the home value. The next $400,000 is then taxed at $8.90/$1,000, bringing you to $3,560. The remaining $75,000 is taxed at $13.50/$1,000 for an additional $1,012.50. Your tax under the new increases would be $4,572.50 total.
As you can see, that is an increase of $717.50 (or 19%) under the new tax increases. That’s if the property is your principal residence. If you are buying an investment property, there will be no exemption and taxes are due in the full amount.
I think I speak for everyone who lives in the area when I say we expect better roads, less crowding in schools, and a variety of other things from the city council after these increases are in place.
I hope you have a better understanding of what your settlement costs will be after September 1st. If you have any further questions, please don’t hesitate to reach out to me. I would be happy to help you!