Beginning on September 30, the recordation and transfer tax rates levied upon the sale of commercial or mixed-use properties in the District of Columbia decreased to a combined rate of 2.9%. Since late 2019, the comparative total rate previously had been 5.0%. At that time, the District had increased recordation and transfer tax rates temporarily from 1.45 to 2.50% for each, totaling 5%. This latest change reverts each rate to the prior levels.
These high tax rates have contributed to fewer transactions and low sale prices per square foot. Despite collecting the higher recordation and transfer tax rates, fiscal year 2023 saw a 50% decrease in corresponding tax revenue, as compared to the preceding year. This trend is indicative of Washington, D.C.’s overall slowdown in real estate activity in recent years. In addition, prospective commercial real estate buyers have been largely deterred by the soaring office vacancy and increasing interest rates. District officials are hoping that the reduced recordation and transfer tax rates will encourage enhanced market activity beginning in fiscal year 2024.
The local experts at Ryan will continue to monitor the market and how this change may impact property owners. As the largest property and transfer/recordation tax practice in the world, our seasoned experts manage billions of dollars of our clients’ real property. We urge you to reach out to our Washington, D.C.-based team prior to any acquisition.
TECHNICAL INFORMATION CONTACTS:
Michael Allen
Principal
Ryan
703.473.6603
michael.allen@ryan.com
Shawn Eskow
Principal
Ryan
571.481.9427
shawn.eskow@ryan.com
Cutchin Powell
Principal
Ryan
202.470.3094
cutchin.powell@ryan.com
Grant Steinhauser
Principal
Ryan
703.746.0022
grant.steinhauser@ryan.com
Libba McCraw
Senior Consultant
Ryan
703.746.0022
libba.mccraw@ryan.com
The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com.