DC Transfer and Recordation Tax: Rates, Exemptions, First-Time Buyers

The District of Columbia charges two taxes every time real property changes hands: a transfer tax on the seller and a recordation tax on the buyer, both calculated on the sale price. For residential deals under $400,000, each tax is 1.1%. At $400,000 or more, each rises to 1.45%. That puts the combined DC transfer and recordation tax on a typical sale between 2.2% and 2.9% of the price, paid once at closing and entirely separate from annual property taxes.

Two Taxes, One Closing Bill

The transfer tax under D.C. Code § 47-903 falls on the person transferring the property.¹ The recordation tax under D.C. Code § 42-1103 is levied on the deed itself and falls on the buyer.² Rates and payment mechanics are identical, which is why most people just say “DC transfer taxes” and mean the combined bill.

The distinction matters in two situations: reading a closing statement, where the two charges appear on separate lines against separate parties, and claiming an exemption, because each tax has its own exemption list in a different section of the code.

How the Rates Work

Both taxes start at 1.1% of consideration. Once a residential price hits $400,000 or more, an extra 0.35% applies to the entire amount, not just the portion above the threshold, raising the effective rate to 1.45%.¹

Residential sale under $400,000: 1.1% transfer tax plus 1.1% recordation tax, 2.2% combined.
Residential sale at $400,000 or more: 1.45% transfer tax plus 1.45% recordation tax, 2.9% combined.

On a $350,000 home, the combined bill is $7,700. On a $500,000 home, the seller owes $7,250 and the buyer owes $7,250, totaling $14,500. Cross the $400,000 line by a dollar and you pay the higher rate on the whole price, so buyers negotiating near the threshold have real money at stake.

Consideration isn’t just cash. Assumed mortgage debt, liens taken on by the buyer, and the value of any property exchanged all count toward the taxable amount. If there is no consideration or the consideration is nominal, the tax runs on the property’s fair market value as determined by the Mayor.¹ The FP-7/C instructions treat “nominal” as less than 30% of fair market value, and in that case you report the latest assessed value instead.³

Who Actually Pays

The statute puts the transfer tax on the seller and the recordation tax on the buyer. Contracts, though, are private. Most DC real estate contracts split the combined total 50/50 between the parties, but nothing requires that. What the District does require is that the full amount be paid before the deed is stamped into the record. The Recorder of Deeds will refuse to process the deed otherwise, regardless of what the contract says about allocation.

If you’re negotiating, read the tax clause carefully. On a $600,000 sale, a 50/50 split versus a statutory allocation moves roughly $4,350 from one side of the table to the other. Title companies and settlement attorneys pull the correct amounts from each party’s funds at closing.

Exemptions That Zero Out the Tax

Transfer tax exemptions live in D.C. Code § 47-902 and recordation tax exemptions in D.C. Code § 42-1102. The lists overlap heavily, and the most commonly used categories are:

Transfers between spouses, domestic partners, parent and child, or grandparent and grandchild where no actual consideration is paid.⁴⁵
Transfers of bare legal title into a revocable trust where the transferor remains the current beneficiary, and transfers to named beneficiaries after the grantor’s death.⁴
Transfers made under a divorce decree or a written separation agreement, exempt from the transfer tax.⁴
Transfers by or to the U.S. government, the DC government, or an organization holding a valid DC real property tax exemption.⁵
Qualifying lower-income homeownership households under D.C. Code § 47-3502, provided the buyer receives a purchase-price credit equal to the tax that would have been due.⁶
Purchase money deeds of trust recorded simultaneously with the deed conveying the property, exempt from the recordation tax so financing at closing isn’t double-taxed.⁵

Claiming an exemption isn’t automatic. You must cite the specific DC Code provision on your FP-7/C filing and attach supporting documentation. A checkbox alone won’t get it approved.

Reduced Recordation Tax for First-Time Homebuyers

DC also offers a reduced recordation tax rate of 0.725% for first-time homebuyers who meet income and price limits. For fiscal year 2026, which began October 1, 2025, the maximum purchase price is $777,000 and household income caps range from $206,640 for a one-person household to $342,360 for a six-person household, based on adjusted gross income from your most recent federal return.⁷

The reduction applies only to the buyer’s recordation tax. The seller still owes the full 1.1% or 1.45% transfer tax on the same transaction. Limits are updated each fiscal year, so check the current OTR publication before assuming you qualify.

Selling the LLC Instead of the Building

Wrapping DC real estate in an LLC and selling the membership interests doesn’t avoid the tax. When someone acquires a controlling interest in an entity that holds DC real property, the District treats it as a taxable transfer of an economic interest even though no deed is recorded.

An entity is covered if, during the 12 months before the transfer, it either derived more than 50% of its gross receipts from DC real property or held DC real property worth 80% or more of its total tangible assets.⁸ The controlling interest can be built up across multiple transactions within a 12-month window and can include indirect ownership through parents or subsidiaries.

The recordation tax rate on economic interest transfers is 2.9% of the consideration allocable to the DC real property, roughly double the standard rate, and the § 47-903 transfer tax still applies to the transferor.² Entity-level deals need their own tax analysis before signing.

Filing and Payment

Every deed submitted for recording must be accompanied by a completed Form FP-7/C, the Real Property Recordation and Transfer Tax Return. The form requires the property’s Square, Suffix, and Lot numbers, available through DC’s online real property assessment database at mytax.dc.gov.³

Both buyer and seller must sign the return under penalty of perjury, certifying that the reported price is accurate. Payment is due at the time of recording, and until it is paid in full the deed does not enter the public record and the new owner has no officially recognized title.⁹

Penalties for Late or Underpaid Tax

Interest on any unpaid transfer or recordation tax accrues at 10% per year, compounded daily, from the date the liability arose.¹⁰ Penalties sit on top of that interest:

Failure to file or pay on time: 5% of the tax due for the first month, plus 5% for each additional month, capped at 25%.¹¹
Negligence or substantial understatement: 20% of the underpayment, doubling to 40% for a gross valuation misstatement.
Fraud: 75% of the portion of the underpayment attributable to fraud.

Deals with non-cash consideration, assumed debt, or property exchanges are where valuations most often go wrong. Getting the number right at closing costs far less than fixing it later.

1
D.C. Law Library. D.C. Code 47-903 – Imposition of Tax; Rate; Returns; Liability for Tax
2
D.C. Law Library. D.C. Code 42-1103 – Imposition of Tax; Rate; Return; Contents; Liability for Tax
3
Office of the Chief Financial Officer – Office of Tax and Revenue. Real Property Recordation and Transfer Tax Form FP-7/C General Instructions
4
D.C. Law Library. D.C. Code 47-902 – Enumeration of Transfers Exempt From Tax
5
D.C. Law Library. D.C. Code 42-1102 – Deeds Exempt From Tax
6
D.C. Law Library. D.C. Code 47-3503 – Exemptions for Qualifying Lower Income Homeownership Households
7
DC Office of Tax and Revenue. ROD 11 – Reduced Recordation Tax Rate for First-Time Homebuyers FY2026
8
D.C. Law Library. D.C. Code 42-1102.02 – Transfer of Economic Interest Defined
9
DC Office of Tax and Revenue. ROD FAQs
10
FindLaw. D.C. Code 47-4201 – Interest on Underpayments
11
D.C. Law Library. D.C. Code Chapter 42, Subchapter II – Penalties