Robert is selling a home in Baltimore County, Maryland. He lists the property and receives two offers on the same day. Offer 1 is from a first-time homebuyer for $380,000 with seller-paid closing costs. Offer 2 is from an investor for $385,000 with the buyer paying all closing costs. Robert's agent explains that under Maryland's transfer tax rules, the seller's net proceeds will differ significantly between the two offers. Which statement correctly explains the Maryland transfer tax impact on Robert's net proceeds?
Correct Answer
C) With the first-time homebuyer offer, Robert pays the full 0.5% state transfer tax; with the investor offer, Robert pays 0.25% and the investor pays 0.25%
Under Maryland's Transfer Tax law, Md. Code Ann., Tax-Prop. §§ 12-101 et seq., the standard state transfer tax is 0.5% of the consideration. Normally, buyer and seller each pay 0.25% (splitting the 0.5% equally). However, when the buyer qualifies as a first-time homebuyer purchasing a principal residence, the buyer's share of the transfer tax is reduced to 0.25% of 0.5% — and the seller is required to pay the full 0.5% state transfer tax. So with the first-time homebuyer, Robert pays the full 0.5%; with the investor, Robert pays his standard 0.25% share. This distinction directly affects Robert's net proceeds from each offer.
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Related Topics & Key Terms
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