Closing Costs on the Hill: DC Taxes Explained

Staring at your Closing Disclosure and wondering why Washington, DC collects two different taxes on one Capitol Hill sale? You are not alone. Understanding which costs are taxes, which are fees, and who typically pays them can help you plan, negotiate, and avoid surprises. In this guide, you will get a clear breakdown of DC’s transfer and recordation taxes, other common closing charges, money‑saving programs, and a simple Capitol Hill example. Let’s dive in.

What closing costs include in DC

Closing costs are the combination of government taxes and private or third‑party fees you pay at settlement. In DC, the largest transaction‑specific government charges are the deed transfer tax and the deed recordation tax. The District sets the rules and rates, and your title company and lender apply them on the settlement statement. The Office of Tax and Revenue explains how these taxes work.

Transfer vs. recordation taxes in DC

What they are and current rates

• Deed recordation tax. Charged when the deed is recorded. The rate for residential property is 1.10% when the price is under $400,000 and 1.45% when the price is $400,000 or more, applied to the full price. See OTR’s guidance.
• Deed transfer tax. A separate tax on the transfer itself, collected alongside recordation. Rates mirror recordation: 1.10% under $400,000 and 1.45% at $400,000 and above. Details here.

Who typically pays in Capitol Hill

Local custom often splits these taxes between the parties. Sellers commonly pay the transfer tax, and buyers commonly pay the recordation tax. Your contract can allocate them differently, so always check the Closing Disclosure. Regional title company guidance reflects this custom.

Combined impact at a glance

Because DC collects both taxes on most sales, total government taxes can equal roughly the sum of each side’s rate. For example, at 1.45% for each party, combined taxes are about 2.90% of the price unless an exemption or reduced rate applies. Always confirm your specific allocation on the settlement statement.

Other common closing fees on Capitol Hill

Recorder of Deeds filing fees

Beyond the percentage taxes, the Recorder of Deeds charges modest flat fees to file documents like the deed and, if applicable, the deed of trust. These amounts change from time to time, so your title company will use the current fee schedule. Review the Recorder of Deeds FAQs for context.

Title insurance basics

Most buyers purchase an owner’s title insurance policy, and lenders require a separate lender’s policy when you finance. Premiums follow regulated rate tables and are typically several thousand dollars on Capitol Hill price points. Ask your title company for an exact quote. The DC Department of Insurance provides rate comparison resources.

Lender and settlement charges

Expect standard items such as the settlement fee, title search, courier, wire, appraisal, credit report, and any lender origination or underwriting fees. If the property is a condo or part of an association, you may also see an association document or estoppel fee. Amounts vary by provider and loan type.

Programs and exemptions that can save you

First‑time DC homebuyer reduced recordation tax

If you are an eligible first‑time DC homebuyer, you may qualify for a reduced recordation tax rate, subject to income and price limits and with required documentation at closing. Review the statute and confirm eligibility with your settlement agent.

Purchase‑money mortgage exemption

When your purchase mortgage is recorded at the same time as the deed and meets specific requirements, the mortgage instrument can be exempt from recordation tax. Timing and form matter, so coordinate with your lender and title company. See the purchase‑money exemption in the DC Code.

Other statutory exemptions

DC recognizes additional exemptions for certain low‑income purchasers, specific nonprofit and government transfers, and some family transfers. Your title company will advise on documentation if you qualify. OTR provides exemption guidance.

Property taxes at closing

DC property tax rate and proration

DC’s residential Class 1 property tax rate is $0.85 per $100 of assessed value. For assessed values above $2.5 million, the portion above that threshold is taxed at $1.00 per $100. At closing, property taxes are prorated based on the settlement date, so each party pays for the time they owned the home. Check OTR’s current rates and proration basics.

Homestead and ongoing relief

After closing, you may qualify for a homestead deduction or other relief programs that can reduce future tax bills. These do not replace transfer or recordation taxes at settlement, but they can affect ongoing costs and future prorations. Program details and eligibility are published by the District. Learn about available homeowner assistance.

Capitol Hill example: simple numbers you can use

Let’s use a sample Capitol Hill price of $900,000 to see how the taxes stack up. Substitute your actual contract price when you calculate.

• Seller transfer tax at 1.45%: $900,000 × 0.0145 = $13,050
• Buyer recordation tax at 1.45%: $900,000 × 0.0145 = $13,050
• Combined transfer + recordation: $26,100 unless an exemption or reduced rate applies

Add the owner’s title insurance premium, any lender’s policy, Recorder of Deeds filing fees, lender charges, and prorated property taxes to complete your total closing figure. Your title company will provide an exact Closing Disclosure.

Quick planning and negotiation tips

• Confirm in the contract who pays transfer and recordation taxes, then verify on the Closing Disclosure.
• If you are a first‑time DC homebuyer, evaluate reduced recordation tax eligibility early so you have documents ready.
• Ask your title company for exact title insurance premiums and current Recorder of Deeds fees before you finalize cash to close.
• If you are financing, check whether your mortgage qualifies for the purchase‑money exemption.
• Review tax prorations and the next tax due date so there are no surprises after settlement.

When you understand DC’s taxes and fees, you can structure your Capitol Hill deal with confidence and avoid last‑minute stress. If you would like a tailored closing estimate and strategy for your sale or purchase, connect with Fleur Howgill.

FAQs

What are DC transfer and recordation taxes on a Capitol Hill home purchase?

• They are two separate taxes collected at settlement: transfer tax on the conveyance and recordation tax on recording the deed. For residential sales, rates are 1.10% under $400,000 and 1.45% at $400,000 and above, applied to the full price when the threshold is met.

In DC home sales, who usually pays transfer vs. recordation tax?

• Customarily the seller pays the transfer tax and the buyer pays the recordation tax, but your contract can allocate them differently and the Closing Disclosure will control.

How can a first‑time DC buyer reduce closing costs?

• If you meet the District’s income and price limits and submit required paperwork, you may qualify for a reduced recordation tax rate as a first‑time DC homebuyer.

Do DC mortgages get taxed when recorded?

• A purchase‑money mortgage recorded at the same time as the deed can qualify for an exemption from recordation tax if it meets statutory timing and form requirements.

How are DC property taxes handled at closing for Capitol Hill homes?

• Property taxes are prorated based on your closing date, so each party pays for the time they owned the home. The residential Class 1 rate is $0.85 per $100 of assessed value, with a higher rate for the portion above $2.5 million.

Which closing costs are negotiable in a DC transaction?

• The contract can negotiate who pays transfer and recordation taxes, and sellers sometimes offer credits toward buyer closing costs. Many third‑party fees are set by provider, so request quotes early to compare and plan.