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Transfer and Recordation taxes are taxes collected by the State of Maryland and the local jurisdictions upon recording of deeds and mortgages/deeds of trusts 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. Transfer and recordation tax rates vary by county.
State transfer tax of 1/2% of the purchase price is uniform throughout the entire State of Maryland. There is an exemption for First Time Maryland Homebuyers. This tax only applies to deeds and is not applicable to mortgages.
County/City transfer tax varies by county and is also based on the purchase price. The sale price times the tax rate equals the amount due.This tax only applies to deeds and is not applicable to mortgages except in certain circumstances in Prince Georges County.
Recordation 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 mortgage/deed of trust. In a purchase situation, the tax is computed as the tax rate times the loan amount. There is a purchase money exemption to the extent that the deed is already simultaneously being taxed on the same funds so you do not need to pay twice on the same money.
In a refinance situation, there is a refinance exemption on this tax up to the amount of money being paid off so you are only paying on any new funds advanced.
Normally a Maryland contract provides who is responsible for the payment of transfer and recordation taxes.
If the contract is silent, Maryland law states the presumption is that the buyer and seller shall split the taxes provided the buyer does not qualify as a First Time Maryland Homebuyer. If the contract is silent, and the buyer is a First Time Maryland Homebuyer, Maryland law states the presumption is that the seller shall pay all the taxes.
In Maryland, on an existing home resale, it is customary for the contract to provide for the transfer and recordation taxes to be split evenly between the buyer and seller. Conversely, on 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).
If the buyer is a "First Time Maryland Homebuyer" then 1/2 of the State Transfer Tax is exempt. The other 1/2 of the State Transfer Tax must by law be paid by the seller.
If you are purchasing a property in Maryland as your principal residence, and have never owned a principal residence in Maryland before, you qualify as a First Time Maryland Homebuyer. Even if you have previously or currently own a principal residence in another state you still qualify. Never owned in Maryland does mean never. There is no exemption available if you have owned a principal residence in Maryland a long time ago. However, even if you have owned real estate in Maryland, which property was never used as your principal residence, you are still eligible for this exemption.
Several Counties have some partial exemptions available for the County Transfer Tax and/or Recordation Tax depending on a variety of owner occupancy factors.
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