Move to Montgomery County
This summer, while we were sunning and funning and whatever else we were doing when the weather warmed up, Montgomery County Maryland was busy passing new laws. And if you plan to buy a home here, what they have been up to will affect you.
Montgomery County is the suburban paradise of DC. I’ve talked about Rockville, Kensington, Chevy Chase, North Bethesda and Bethesda. This is a lovely place to live if you like green space, smart growth, great schools, bad drivers, and lots of laws. But every time I turn around it seems like the county is getting in its own way of growth. It’s almost like they don’t want people here. There’s no real encouragement for businesses to set up shop here, and they are very tough on renovation and building permit approvals.
So, what have they done now?
In May, 2023, the county unveiled their new plan for real estate transfer taxes which will go into effect October 1, 2023.
What are the taxes now, before we get to October 1, 2023? There are 4 pieces to the taxes.
- The state transfer tax is .5%.
- The state recordation is .89%.
- The county transfer tax is 1%.
Last is the county recordation tax. Right now, up to $500,000, Montgomery County recordation is .89%. Over $500,000 it’s 1.35%
If we add all that up, right now under $500,000 the total taxes paid are 2.479% and above $500,000 taxes are 2.525%
In a couple weeks, both state taxes and the county transfer tax won’t change. They will still total 2.39%, and homes up to $500,000 will still have the .89% like they are now and from $500,001 to $600,000 the taxes will still be 1.35%. What happens after $600,000 though is an incremental disaster.
From $600,001 to $750,000, there will be an additional 2.04%.
From $750,001 to $1M, there will be an additional 2.156%.
Homes over $1M will have an additional 2.27% added.
Current taxes on a $700,000 home are $7150. Now taxes on that same home sale will be $7840.
Current taxes on a $1M home are $11,200. After October 1 they will be $14,250. Homes costing $2M are currently $24,700, and Oct 1 they will be $36,950.
What are they doing with the additional money? They are splitting it into 3 equal funds – capital improvements to the public schools, rental assistance programs and government projects. This is a pretty steep increase in transfer and recordation taxes. While these are one time fees paid at the time of purchase, the propensity for major tax increases is following over to the annual property taxes as well. This year they approved a 4.7% tax hike for annual property taxes which will be 100% allocated to the schools. If you’re planning to buy in Montgomery County, know that you can count on having some of the highest property and real estate related taxes in the DC Metro area.