Are you seeing “transfer tax” and “recordation tax” on a closing estimate and wondering what they actually mean? You are not alone. These two taxes are a standard part of Maryland real estate closings, and in Montgomery County they can add up to a meaningful line item for buyers and sellers. In this guide, you will learn what each tax covers, how they are calculated and collected in Rockville, who typically pays, and where exemptions may apply. Let’s dive in.

Transfer vs. recordation taxes

What is a transfer tax?

A transfer tax is imposed when ownership of real property changes hands. In a home sale, it is usually based on the sales price or other statutory measure. In Maryland, the state charges a transfer tax and many counties, including Montgomery County, also levy a local transfer tax. Both can apply to the same deed.

What is a recordation tax?

A recordation tax is charged when a document such as a deed or a mortgage (often called a deed of trust) is recorded in the land records. For mortgages, the tax is often calculated on the principal amount of the loan. Like transfer taxes, recordation taxes may be imposed at both the state and county levels.

The practical difference at closing

Think of transfer tax as tied to the actual transfer of ownership, while recordation tax is tied to the act of recording the instrument. Both are typically collected at settlement by your title company or settlement attorney and remitted to the appropriate Maryland and Montgomery County offices.

How Montgomery County and Maryland apply them

Layered state and county charges

Maryland imposes state transfer and recordation taxes. Montgomery County may add local transfer and recordation taxes on top of the state amounts. A single sale can generate multiple line items on your Closing Disclosure, such as state transfer tax, county transfer tax, state recordation tax, and county recordation tax.

Collected and paid through settlement

Your settlement agent or title company calculates these taxes, collects the funds at closing, and submits the payments when they record your documents. Recording generally cannot proceed until required taxes and fees are paid or a qualifying exemption is properly documented.

Where to confirm the latest details

Rates and program rules can change. Before you rely on a specific figure, confirm with your title company or the Montgomery County and Maryland offices that administer these taxes. Settlement professionals work with these numbers daily and will provide the exact amounts for your transaction.

Who pays in Rockville transactions

Law, custom, and negotiation

Statutes set out when the taxes are due, but who pays is often a matter of local custom and the purchase contract. In practice, parties in Montgomery County may negotiate how to share or allocate transfer and recordation costs. The safest move is to address this directly in the contract and confirm on your draft Closing Disclosure.

What you should do

• Ask your agent how these costs are typically handled in comparable transactions.
• Decide your negotiating position early and document it in the offer or counteroffer.
• Confirm with your title company which line items will appear on the buyer and seller sides of the settlement statement.

What it costs and how to estimate

The basic formulas

• Transfer tax amount = transfer tax rate × taxable consideration (often the purchase price).
• Recordation tax on a mortgage = recordation tax rate × principal loan amount (or other statutory basis).

Example: assumed rates only

The figures below are for illustration only. Always verify current rates for Maryland and Montgomery County before relying on a dollar amount.

• Home price: $500,000
• Mortgage amount: $400,000
• Assumed state transfer tax rate: 0.5% (example)
• Assumed county transfer tax rate: 1.0% (example)
• Assumed recordation tax rate on the mortgage: 0.5% (example)

Using these placeholder rates:

• State transfer tax: 0.005 × $500,000 = $2,500
• County transfer tax: 0.01 × $500,000 = $5,000
• Total transfer taxes: $7,500
• Recordation tax on the mortgage: 0.005 × $400,000 = $2,000

Again, these are not actual Montgomery County figures. Your title company will calculate precise amounts for your address, price, and loan.

Exemptions and credits to explore

Common scenarios that may qualify

Many exemptions are narrowly defined and require documentation. Typical categories include:

• Transfers between spouses or incident to divorce
• Transfers as a gift, inheritance, or by will
• Transfers to or from certain governmental entities
• Foreclosure or similar creditor-protection situations defined by statute
• Nonprofit organizations in specific cases
• Certain refinancing transactions where the debt is re-recorded without an increase in principal

First-time buyer or principal residence benefits

Some programs provide credits or partial relief for first-time buyers or principal residences. Availability and terms vary by jurisdiction and can change, so confirm any current Montgomery County or Maryland programs with your settlement agent or the relevant offices.

Documentation matters

Most exemptions require a sworn statement or form that is submitted with the recording package. If you might qualify, alert your agent and title company early so they can prepare the correct forms and avoid delays in recording.

Refinancing vs. purchasing

How a purchase differs

A purchase usually triggers transfer tax on the conveyance and recordation tax on any new mortgage. Both taxes are typically collected when the deed and deed of trust are recorded.

What happens in a refinance

Refinances generally do not involve a transfer of ownership, so transfer tax typically does not apply. However, a new or increased mortgage may trigger recordation tax, often calculated on the principal amount. Some refinances that merely re-record existing debt without increasing principal can be eligible for reduced recordation charges, subject to specific rules. Confirm with your title company whether your refinance qualifies.

How these taxes appear on your Closing Disclosure

Where to look on the forms

You will usually see transfer and recordation taxes listed as separate line items under “Other Closing Costs,” with clear allocations to either the buyer or the seller side. If you have a loan, any recordation tax on the mortgage is typically collected by the settlement agent in coordination with your lender.

Why this matters for budgeting

Because these taxes can be material, build them into your buyer cash-to-close or seller net sheet from the start. Ask your title company for an itemized estimate as soon as you go under contract.

Rockville buyer and seller checklist

Use this quick list to stay ahead of the details:

• Clarify who will pay transfer and recordation taxes in your offer or contract.
• Ask your title company for a draft Closing Disclosure that itemizes Maryland and Montgomery County transfer and recordation taxes.
• If you are refinancing, confirm whether recordation tax applies and whether any exemptions are available.
• If your situation involves a divorce, gift, inheritance, nonprofit status, or a foreclosure context, notify your title team early to prepare necessary exemption forms.
• Confirm that your settlement agent will submit all required documentation so recording is not delayed for missing tax stamps or forms.

Partner with a team that sweats the details

Local transactions move quickly, and small details can have a big impact on your bottom line. A seasoned team will coordinate with your title company, flag exemptions you may qualify for, and negotiate closing cost allocations clearly in your contract. If you are selling, professional preparation and marketing can also help you protect net proceeds while navigating these taxes with confidence.

Ready to talk strategy for your Rockville move and get a line-by-line estimate of your closing costs? Request a complimentary market plan and staging consultation from Unknown Company.

FAQs

What is the difference between transfer and recordation taxes in Montgomery County?

• Transfer tax applies to the conveyance of property, while recordation tax applies when instruments such as deeds and mortgages are recorded. Both may be due at the same closing.

In Rockville, who typically pays transfer and recordation taxes?

• Responsibility is negotiable and often guided by local practice and your purchase contract. Confirm the allocation with your agent and title company before you sign.

Are there first-time homebuyer or principal residence tax breaks?

• Some programs may offer credits or partial relief, but availability and rules change. Verify current Montgomery County and Maryland programs with your settlement agent.

Do refinances trigger the same taxes as purchases?

• Refinances generally do not involve transfer tax, but a new or increased mortgage may trigger recordation tax. Some refinances qualify for reduced charges under specific rules.

Where will these taxes appear on my Closing Disclosure?

• They typically appear under “Other Closing Costs,” with separate line items for transfer tax and recordation tax and clear allocations to buyer or seller.

How do I confirm the current tax rates for my Rockville transaction?

• Ask your title company for an itemized estimate and check with Montgomery County and Maryland offices that administer transfer and recordation taxes, since rates and rules can change.