Relating to Real Estate

Shortly after we pointed out in the Relating to Real Estate Bulletin dated January 3, 2019 that the Baltimore City yield tax law was written in a way to collect substantially less than the City thought it was going to collect, the Director of the Department of Finance issued a letter agreeing with our interpretation. The yield tax is a new tax on deeds for more than $1,000,000 or deeds of trust or mortgages that secure more than $1,000,000 recorded among the Land Records of Baltimore City. The tax is calculated in two parts: as a percentage of the recordation tax and as a percentage of the transfer tax that are otherwise due. The proceeds of the yield tax are dedicated to the Affordable Housing Fund.

As of April 1, 2019, the yield tax is 15% of the recordation collected in Baltimore City and 40% of the Baltimore City transfer tax. See Baltimore City Code Art. 28 § 17.1-2. Because in Baltimore City the recordation tax is 1%, that portion of the yield tax will be 0.15%. Because the Baltimore City transfer tax is 1.5%, that portion of the yield tax will be 0.6%.

Now in Baltimore City, the taxes on a deed of more than $1,000,000 will be 3.75%, consisting of the recordation tax (1%), recordation tax yield tax (0.15%), Baltimore City transfer tax (1.5%), Baltimore City transfer tax yield tax (0.6%), and State of Maryland transfer tax (0.5%).

Below is a chart that sets forth the recordation and transfer taxes in central Maryland.

Recordation and Transfer Taxes in Central Maryland as of April 1, 2019

NOTES: ¹ Recordation tax rates are actually stated as $X per $500 of consideration, with the consideration rounded up to the nearest $500. This chart converts the recordation tax to a percentage for each county. It is much easier to calculate the recordation tax this way, but the calculation may be a few dollars off (short) of the actual recordation tax.

² The column headed “Total for Deeds” is the total of the recordation and transfer taxes applicable for deeds in the respective jurisdictions. In Prince George’s County only, the local transfer tax also applies to mortgages and deeds of trust. The State transfer tax is never applicable to mortgages or deeds of trust. In all jurisdictions except for Prince George’s County, the only tax applicable to mortgages and deeds of trust is the recordation tax, provided that in Baltimore City for instruments that secure more than $1 million there is also a yield tax based on the recordation tax. Therefore, to determine the tax on mortgages and deeds of trust, use the column headed “Recordation Tax” and, only in Prince George’s County, use the column headed “Local Transfer Tax.”

³ The Baltimore City yield tax only applies if the consideration or amount secured exceeds $1 million.

⁴ In Montgomery County, the recordation tax is .89% on the first $500,000 and 1.35% above that. Also, the first $100,000 is exempt from the recordation tax for a principal residence.

⁵ In Prince George’s County only, the local transfer tax applies to mortgages and deeds of trust.

GENERAL NOTE: There are a number of exemptions to recordation and transfer taxes that are set forth in Md. Code, Tax-Property Article §12-108 as well as in the codes of the local jurisdictions.

For questions contact Ed Levin (410) 576-1900.