Recordation and Transfer Tax Changes in Maryland and the District of Columbia

Seyfarth Synopsis: Montgomery and Anne Arundel Counties in Maryland are increasing their recordation and transfer taxes, while 2019 increases to recordation and transfer taxes in the District of Columbia are set to expire.

District of Columbia

Despite recent opposition by some members of the DC Council, the District of Columbia’s 2024 fiscal year budget was recently approved by the Council and Mayor Muriel Bowser without an extension to the September 30, 2023 expiration date for the District’s 2019 recordation and transfer tax rate increases. As a result, those rate increases remain set to expire as of September 30, 2023. 

During a budget hearing on May 16, 2023, councilmember Zachary Parker proposed an amendment that would have extended the sunset date for the 2019 tax increases to September 30, 2029, but he withdrew the amendment following the objection of other councilmembers who were concerned that extending the increases would negatively impact the already struggling commercial real estate market in the District’s central business district.

On October 1, 2019, the District increased both transfer and recordation tax rates on the transfer of Class 2 commercial properties with a taxed consideration of $2,000,000 or more from 1.45% to 2.5%, resulting in a combined total of 5%. At the same time, the District increased the recordation tax rate for deeds of trust securing a debt of $2,000,000 or more from 1.45% to 2.5% and increased the recordation tax rate applicable to the transfer of economic interests in entities that own Class 2 commercial properties valued at $2,000,000 or more from 2.9% to 5.0%.

As of October 1, 2023, the rates noted above will revert to their pre-October 1, 2019 levels of 1.45% and 2.9% respectively.

Montgomery County

On May 9, 2023, the Montgomery County Council passed Bill 17-23, which will increase recordation taxes for recordations related to sale and mortgage transactions in excess of $600,000. The increases will be effective as of October 1, 2023.

For any transaction that occurs on or after October 1, 2023, the full schedule of recordation tax rates for sale and mortgage transactions, inclusive of the base rate and premium rates, shall be as follows:

• $500,001 - $600,000 of consideration payable or principal amount of debt secured, including the mortgage or deed of trust assumed by a grantee will be taxed at $6.75 per $500, or a fraction thereof.
• $600,001 - $750,000 of consideration payable or principal amount of debt secured, including the mortgage or deed of trust assumed by a grantee will be taxed at $10.20 per $500, or a fraction thereof.
• $750,001 - $1,000,000 of consideration payable or principal amount of debt secured, including the mortgage or deed of trust assumed by a grantee will be taxed at $10.78 per $500, or a fraction thereof.
• $1,000,001 and over of consideration payable or principal amount of debt secured, including the mortgage or deed of trust assumed by a grantee will be taxed at $11.35 per $500, or a fraction thereof.

Note that, in addition to recording taxes, sales transactions in Montgomery County are subject to a county transfer tax of 1.0% and a state transfer tax of 0.5%.

Anne Arundel County

On June 14, 2023, the Anne Arundel County Council passed Bill 40-23, which, effective as of July 1, 2023, increased the county transfer tax on transfers for which the total consideration is $1,000,000 or more from 1.0% to 1.5%.  The county transfer tax remains at 1.0% for transfers for which the total consideration is less than $1,000,000.

The bill further provides that transfers of interests in certain affordable housing in the City of Annapolis will be exempt from the increased rate.

Note that, in addition to county transfer taxes, sales transactions in Anne Arundel County are subject to a state transfer tax of 0.5% and a recordation tax of $7.00 per $1,000 in consideration.