A first-time homebuyer in Maryland purchases a property in Frederick County for $320,000. Because the buyer qualifies as a first-time homebuyer purchasing a principal residence, Maryland law shifts the full state transfer tax obligation to the seller, and the buyer pays a reduced state transfer tax rate of 0.25% instead of the standard 0.5%. How much does the buyer pay in Maryland state transfer tax at settlement?
Correct Answer
A) $800
Step 1: Identify the applicable rate. For a first-time homebuyer purchasing a principal residence in Maryland, the state transfer tax rate is reduced to 0.25% (versus the standard 0.5%). Step 2: Determine who pays. Maryland law shifts the full state transfer tax obligation to the seller when the buyer is a first-time homebuyer. However, the buyer still pays the reduced 0.25% rate on their portion — the 'shift' means the seller pays the seller's standard half (0.25%) PLUS takes on what would have been the buyer's standard half, but the buyer still pays their reduced rate of 0.25%. Step 3: Calculate buyer's payment. Buyer's state transfer tax = $320,000 × 0.0025 = $800. The correct answer is $800.
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