Recordation & Transfer Tax (R&T) Policy Options

The staff of the Tax Revision Commission (TRC) has released policy options for the Commissioners to consider based on the presentations and research materials they have received.

The Commission is strongly encouraging public feedback on these proposals:

• Eliminate R&T tax for all property or reduce to 0.433% (VA Rate);

• Eliminate the R&T tax increase of 1.1% to 1.45% (“Bump") at $400,000 for residential properties by using marginal rates (example below);

• Create more progressive housing price brackets with marginal rates (example below);

• Raise income limit for R&T tax exemption for lower/moderate residents;

• Waive R&T taxes for first-time homebuyers, and/or

• Increase commercial R&T tax rate from 2.9% to 4.9%

***If you are unfamiliar with some of these terms we have provided examples in the survey below in how they are intended and might affect the market.

DCAR wants to know how these policy options would affect your business. We have designed the following survey questions to find the pulse of where our members stand on these issues.

Please note that these proposals are not final.

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* 1. The elimination or severe reduction of R&T taxes will have a _____________ impact on housing prices.

Example: Currently, residential properties sold for less than $400,000 pay 1.1% rate for both R&T taxes, while residential properties sold for $400,000 or more and all commercial properties pay a 1.45% rate for both. This would effectively knock all of those rates down to 0.433%.

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* 2. A marginal rate above $400,000 for R&T taxes would create more fairness in the housing market.

Example: Right now if you purchase a $410,000 house, you need to pay the higher tax rate (1.45%) on the entire purchase. Conversely, if a marginal tax rate were implemented, you would just pay 1.45% rate on the excess $10,000.

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* 3. The $400,000 bump causes price manipulation.

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* 4. The creation of more progressive housing price brackets with marginal rates for R&T taxes would _____________ the housing market.

Example: Now there are only two brackets for residential homes above and below $400,000. This policy option could create additional brackets at various price-points.

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* 5. Would raising the income exemption limit for lower/moderate-income residents be a sufficient alternative to lowering R&T taxes across the board?

Example: This option could make a family of four earning around $100,000 exempt from the R&T tax. Now, a family of four around $60,000 is exempt.

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* 6. Would waiving R&T taxes for first-time homebuyers be a sufficient alternative to lowering R&T taxes across the board?

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* 7. Raising the commercial R&T tax rate to 4.9% would have a “minimal” impact on the commercial market.

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* 8. How would you structure DC's R&T taxes?

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* 9. Rank each policy in an order from most effective to least effective.

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