Thomas and Linda are selling their Montgomery County home to Kevin, who qualifies as a first-time homebuyer purchasing a principal residence. The contract is silent on how transfer taxes will be allocated. At settlement, the title company prepares the closing disclosure. Which of the following correctly describes the Maryland state transfer tax allocation that should appear on the closing disclosure?
Correct Answer
B) Kevin pays 0.25% and Thomas and Linda pay 0.5%, for a combined total of 0.75% of the purchase price.
Under Md. Code Ann., Tax-Prop. § 13-203(b), when a buyer qualifies as a first-time homebuyer purchasing a principal residence, the state transfer tax structure is as follows: (1) the buyer pays a reduced rate of 0.25% of the consideration, AND (2) the seller is required to pay the full standard rate of 0.5% of the consideration. This results in a combined total of 0.75% of the purchase price, which is higher than the standard 0.5% split in a non-exempt transaction. This is the uniquely Maryland rule that shifts and adds tax responsibility to the seller.
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