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Estimate Title Costs →If you are buying your first home in Washington, DC, the District's first-time homebuyer rate is one of the largest closing-cost savings available to you. It cuts the recordation tax on your deed roughly in half.
It is a reduced rate, not an exemption: a qualifying buyer still pays recordation tax, just less of it. DC does have a separate program that removes the tax entirely, the Lower Income Homeownership exemption, and it is covered below because the two are often confused.
What the DC first-time homebuyer rate actually is
DC charges recordation tax when a deed is recorded. On a residential purchase the standard rate is 1.1% of the price, rising to 1.45% when the price is $400,000 or more (D.C. Code § 42-1103(a)).
For a qualifying first-time District homebuyer, the rate on the deed drops to 0.725% (D.C. Code § 42-1103(e)). The entire benefit has to go to the buyer on the settlement statement.
It is not the same thing as:
- the DC Homestead Deduction, which lowers your annual property tax after you own the home (though, as you will see below, applying for it is part of qualifying)
- down-payment assistance, a lender credit, or a seller concession
- the Lower Income Homeownership exemption, a separate program with stricter income and price limits
Who qualifies
Under D.C. Code § 42-1103(e)(2), when the deed is recorded the buyer must:
- Be a first-time District homebuyer and a bona fide DC resident, and certify both.
- Meet the income limit: household federal adjusted gross income no higher than 180% of the Area Median Income.
- Buy eligible property. DC's Office of Tax and Revenue sets a purchase-price cap for each fiscal year (starting October 1), so check the current figure before you rely on it.
- Apply for the homestead deduction on the home.
Every buyer taking title matters. If a co-buyer already owned a DC home, or the home is being bought by a trust or an entity, the file may not qualify even when one buyer is genuinely first-time. A DC closing company that handles District files regularly can check this for you early.
How much it saves
The saving is the difference between the standard rate and 0.725%:
- $500,000 purchase: 1.45% is $7,250; at 0.725% it is $3,625. You save $3,625.
- $380,000 purchase: 1.1% is $4,180; at 0.725% it is $2,755. You save $1,425.
It lowers the recordation tax only. DC's transfer tax is the seller's responsibility (D.C. Code § 47-903), and title insurance, lender fees, and prepaid items are unchanged. See DC real estate taxes for the full picture.
The Lower Income Homeownership exemption (a different program)
DC also offers a full exemption from both recordation tax and transfer tax, plus five years of real property tax exemption, for a qualifying lower income homeownership household (D.C. Code § 47-3503). Its limits are tighter than the first-time rate:
- household income no higher than 120% of HUD's lower income guidelines for the Washington area (D.C. Code § 47-3502)
- a purchase price no higher than 80% of the prior year's median DC home sale price
- the household must live in the home, and an exemption application must be filed
If you are near those limits, ask about this program first. If you qualify, it is worth more than the first-time rate.
How it shows up at closing
The reduced rate is claimed when the deed is recorded, so your settlement company has to know you qualify before the Closing Disclosure is prepared. On a clean file, the buyer's recordation tax line on the settlement statement is simply calculated at 0.725%.
Plan to provide, as soon as you are under contract:
- the District's first-time homebuyer certification for each buyer
- proof of DC residency and identification for each buyer
- household income documentation for the 180% AMI test
- your homestead deduction application
If the paperwork arrives late, figures get redrawn and funding can slip. If eligibility falls through at the last minute, the buyer needs the difference in cash the same day, so compare your cash-to-close both with and without the reduced rate.
Refinances, second homes, and investment property
The reduced rate applies to a qualifying first-time purchase of a home you will live in. It does not apply to a refinance, a second home, or an investment purchase, and entity or trust buyers generally fall outside it.
Checklist for DC first-time buyers
- Tell your agent, lender, and settlement company on day one that you intend to claim the first-time homebuyer rate.
- Check the current price cap and the 180% AMI income limit for your household size.
- Confirm every adult taking title qualifies, not just one of you.
- File your homestead deduction application.
- If your income is lower, ask whether the Lower Income Homeownership exemption fits you better.
- Compare cash-to-close with and without the reduced rate, so a paperwork problem doesn't surprise you.
Bottom line
For a qualifying buyer, DC's first-time homebuyer rate cuts deed recordation tax from 1.1% or 1.45% to 0.725%, which often means thousands of dollars. It pays only when eligibility and paperwork are settled before final figures.
Will Rapuano can answer questions about your DC purchase and, if you want, introduce you to Pruitt Title, which reviews the file and confirms its own scope and pricing.
Frequently Asked Questions
What does DC offer first-time homebuyers on recordation tax?
A reduced rate. A qualifying first-time District homebuyer pays deed recordation tax at 0.725% instead of 1.1% (or 1.45% at $400,000 and above), under D.C. Code § 42-1103(e). It is a reduced rate, not an exemption, and the full benefit must go to the buyer.
Who qualifies as a first-time homebuyer in DC?
You must certify that you are a first-time District homebuyer and a bona fide DC resident, have household federal adjusted gross income at or below 180% of the Area Median Income, buy property under the price cap DC's Office of Tax and Revenue sets each fiscal year, and apply for the homestead deduction.
How much does the DC first-time homebuyer rate save?
On a $500,000 home, recordation tax falls from $7,250 (1.45%) to $3,625 (0.725%), a $3,625 saving. On a $380,000 home it falls from $4,180 (1.1%) to $2,755, a $1,425 saving.
Is there a full exemption from DC recordation tax?
Yes, but it is a different program. The Lower Income Homeownership exemption (D.C. Code § 47-3503) removes recordation and transfer tax for a household with income at or below 120% of HUD's lower income guidelines buying at no more than 80% of the prior year's median DC sale price.
Does the reduced rate apply to refinances or investment properties?
No. It applies to a qualifying first-time purchase of a home the buyer will live in. Refinances, second homes, investment purchases, and entity or trust buyers generally do not qualify.
General information about title insurance and closing costs in Virginia, Maryland and DC, not legal or tax advice. Tax rates, fees and rules change, so confirm the figures for your own transaction.
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