A Montgomery County buyer who closes on a $725,000 principal residence in 2026 faces three separate government charges tied to the contract price, and together they come to $18,335 before anyone decides who pays which share. That figure is larger than many buyers budget for, particularly if they are relocating from a state where transfer taxes are a rounding error.
That said, the number is entirely predictable once you know how the three taxes stack. This guide works through one 2026 purchase line by line, lists the inputs a calculator needs, and shows exactly where each charge lands on your Closing Disclosure.
Montgomery County buyers face three price-based charges: the county recordation tax (tiered per $500), the county transfer tax (1%) and the Maryland state transfer tax (0.5%, or 0.25% for first-time buyers).
Why Montgomery County Stacks Differently
If you read our Howard County transfer tax breakdown, you already know that every Maryland county sets its own recordation rate and its own local transfer tax. Montgomery County is unusual because its recordation tax is not one rate at all, but a base rate, a school increment and a four-step premium that only applies to the portion of the price above $500,000.
As a result, two buyers in the same county can pay very different effective rates. A $450,000 condo and a $1.2 million single-family home do not simply scale up in proportion; the second buyer crosses every premium tier, and each tier adds to the per-$500 charge on the slice of price that falls inside it.
The Three Taxes And What Governs Each One
Before running any numbers, it helps to separate the three charges by who imposes them and which law sets the rate. Here is how they break down:
- County recordation tax. Levied under Maryland Tax-Property Code §§12-101 to 12-118, with the Montgomery County rates set in County Code §52-16B as amended by Bill 17-23, effective October 1, 2023. It is charged per $500, or fraction of $500, of consideration.
- County transfer tax. The county's Department of Finance states on its MC311 transfer tax page (last updated May 19, 2026) that the county transfer tax is typically computed at 1% of the selling price.
- State transfer tax. Set by Maryland Tax-Property §13-203 at 0.5% of consideration, with a reduced 0.25% rate for qualifying first-time Maryland homebuyers.
All three are calculated on the consideration, which is essentially the contract price. Keep in mind that none of them is based on your loan amount, which is why a larger down payment does not reduce them.
Montgomery County Recordation Tax Tiers
The enacted text of Bill 17-23 amends County Code §52-16B(a) to charge two flat components on every $500 of consideration, plus a premium on the amount above $500,000. The table below mirrors the enacted tiers exactly as the bill lists them:
| Component (§52-16B(a), eff. Oct. 1, 2023) | Applies to | Rate per $500 | Revenue goes to |
|---|---|---|---|
| Base rate — (1)(A) | All consideration | $2.08 | County general fund |
| School increment — (1)(B) | All consideration | $2.37 | Public school capital improvements |
| Premium — (2)(A) | Amount over $500,000, up to $600,000 | $2.30 | Split in thirds: county capital, rent assistance, schools |
| Premium — (2)(B) | Amount over $600,000, up to $750,000 | $5.75 | Split in thirds: county capital, rent assistance, schools |
| Premium — (2)(C) | Amount over $750,000, up to $1,000,000 | $6.33 | Split in thirds: county capital, rent assistance, schools |
| Premium — (2)(D) | Amount over $1,000,000 | $6.90 | Split in thirds: county capital, rent assistance, schools |
Note that each premium applies only to the slice of price inside its band, much like income tax brackets. A $725,000 purchase pays the $5.75 premium on the $125,000 between $600,000 and $725,000, not on the whole price.
Montgomery County premium tiers are marginal. Each rate applies only to the part of the price inside its band, so crossing $600,000 or $750,000 raises the tax on that slice alone.
The $100,000 Principal Residence Exemption
The Montgomery County Council's staff report on Bill 17-23 (action packet dated May 9, 2023) explains that for a primary residence occupied at least seven months in the first year, the first $100,000 of value is not taxed. What's more, the report's footnote states plainly that the exemption does not apply to refinances, second homes or commercial transactions.
In practice, the exemption removes $100,000 from the base and school-increment calculation only. The council's own price table confirms this, since its $500,000 figure of $3,560 equals 800 units of $500 multiplied by $4.45.
That works out to $890 in savings, which matches the "$890.00 exemption" the county's MC311 page describes for owner-occupied residential property. The premium tiers, however, are still measured against the full contract price.
A Montgomery County principal residence exempts the first $100,000 of price from the $4.45-per-$500 base and school rates, saving $890. Refinances, second homes and commercial deals do not qualify.
Worked Example: A $725,000 Purchase In 2026
For this illustrative example, assume a buyer purchases an existing single-family home in Montgomery County for $725,000 in 2026. The buyer will occupy it as a principal residence and has owned a principal residence in Maryland before, so the first-time state rate does not apply.
Step One: County Recordation Tax
First, subtract the $100,000 exemption from the price and divide by $500 to get the base-and-school units. Then apply each premium tier to its own slice of the full $725,000 price:
| Calculation | Taxable amount | Units of $500 | Rate | Tax |
|---|---|---|---|---|
| Base + school increment | $625,000 ($725,000 − $100,000) | 1,250 | $4.45 | $5,562.50 |
| Premium (2)(A) | $100,000 ($500,000 to $600,000) | 200 | $2.30 | $460.00 |
| Premium (2)(B) | $125,000 ($600,000 to $725,000) | 250 | $5.75 | $1,437.50 |
| Total recordation tax | $7,460.00 |
Step Two: County And State Transfer Taxes
Next, the county transfer tax at 1% of $725,000 comes to $7,250. The state transfer tax at 0.5% under §13-203(a) comes to $3,625.
All of the above adds up to $18,335 in price-based government charges on this one transaction. That total excludes flat clerk recording fees, which are separate and discussed below.
Step Three: Allocating The Charges
Who pays each tax is set by your sales contract, not by the county. The council staff report notes that standard practice is for buyer and seller to split the recordation tax equally, and the allocation of each transfer tax is likewise a negotiated contract term.
Assuming an even split of all three taxes, which is illustrative and must be checked against your own contract, the buyer's share looks like this:
| Tax | Total | Buyer share (50/50, illustrative) | Seller share (50/50, illustrative) |
|---|---|---|---|
| County recordation tax | $7,460.00 | $3,730.00 | $3,730.00 |
| County transfer tax (1%) | $7,250.00 | $3,625.00 | $3,625.00 |
| State transfer tax (0.5%) | $3,625.00 | $1,812.50 | $1,812.50 |
| Total | $18,335.00 | $9,167.50 | $9,167.50 |
On an illustrative $725,000 Montgomery County purchase with an even split, the buyer pays about $9,167.50 in recordation and transfer taxes. The sales contract controls the actual split.
How The First-Time Maryland Homebuyer Rule Changes The Math
Under Tax-Property §13-203(b)(3), a sale of improved residential property to a first-time Maryland homebuyer who will occupy it as a principal residence is taxed at 0.25% instead of 0.5%. In addition, the statute states that this reduced state tax "shall be paid entirely by the seller."
On the same $725,000 home, the state transfer tax drops to $1,812.50 and moves entirely to the seller's column. Under the illustrative even split of the county taxes, the buyer's share falls from $9,167.50 to $7,355.
Keep in mind that §13-203(b)(2) requires every grantee to qualify, unless a non-occupying co-maker or guarantor on the purchase-money loan signs instead. Each grantee also signs a sworn statement under §13-203(b)(4) confirming they have never owned a Maryland principal residence.
County transfer tax exemptions: The county's published guidance describes its transfer tax as "typically" 1%, which means exemptions can apply in some transactions. Confirm eligibility for any county-level first-time buyer or affordability exemption with the Department of Finance Transfer Office at 240-777-8995 before you rely on it in your cash-to-close.
If you are also layering a state down-payment program, our Maryland SmartBuy 3.0 guide and Maryland mortgage overview cover how those programs interact with your closing funds.
Recordation Tax At Common Montgomery County Price Points
Because the premium tiers are marginal, the recordation tax climbs faster once a price crosses $600,000. The figures below apply the enacted §52-16B rates with the $100,000 principal residence exemption, and the $500,000, $1,000,000 and $1,250,000 rows match the council staff report's own table for the enacted rates:
| Contract price (principal residence) | Total recordation tax | Buyer half (illustrative) |
|---|---|---|
| $500,000 | $3,560 | $1,780 |
| $600,000 | $4,910 | $2,455 |
| $725,000 | $7,460 | $3,730 |
| $750,000 | $7,970 | $3,985 |
| $1,000,000 | $13,360 | $6,680 |
| $1,250,000 | $19,035 | $9,517.50 |
For instance, the jump from $750,000 to $1,000,000 adds $5,390 in recordation tax on a $250,000 price increase. This is because the $6.33 premium stacks on top of the $4.45 base and school rates for that entire band.
Where Each Fee Lands On The Closing Disclosure
All three taxes appear on page 2 of the Closing Disclosure, in Section E, "Taxes and Other Government Fees." Under 12 CFR §1026.38(g)(1), line 01 shows recording fees for the deed and the security instrument, and the subsequent lines itemize each transfer tax with the name of the government entity assessing it.
Moreover, the CFPB's official commentary to §1026.37(g)(1), comment 3, says transfer taxes are government fees "based on the loan amount or sales price," and that the name used under state or local law is not determinative. Accordingly, Montgomery County's recordation tax, which is computed on price, is itemized as a transfer tax rather than lumped into line 01.
Here is how the $725,000 example would typically map to Section E:
- Line 01 — Recording Fees. Flat clerk charges to record the deed and the deed of trust. These are based on the document, not the price, per comment 37(g)(1)-1.
- Line 02 — Recordation Tax to Montgomery County. $3,730 in the Borrower-Paid column and $3,730 in the Seller-Paid column under the illustrative split.
- Line 03 — Transfer Tax to Montgomery County. $3,625 in each column under the illustrative split.
- Line 04 — Transfer Tax to the State of Maryland. $1,812.50 in each column, or $1,812.50 entirely in the Seller-Paid column for a qualifying first-time Maryland homebuyer.
Note that comments 37(g)(1)-4 and -5 state that the Loan Estimate shows only the transfer taxes the consumer pays. Seller-paid transfer taxes first appear on the Closing Disclosure, so your Loan Estimate may look lower than the combined total above.
Montgomery County recordation and transfer taxes appear in Section E of the Closing Disclosure. Line 01 holds flat recording fees; later lines itemize each price-based tax by government entity.
What About The Deed Of Trust?
Many buyers assume their mortgage triggers a second recordation tax. However, Tax-Property §12-108(i)(3) states that a purchase-money mortgage or deed of trust is not subject to recordation tax.
To qualify, §12-108(i)(1) requires that the deed of trust be delivered in the same transaction, recite that it secures purchase money, be fully executed within 30 days of the deed and be recorded within 30 days after the deed. Your settlement agent handles this, but it is why the recordation tax in a standard purchase is calculated on the deed consideration alone.
Calculator Inputs You Need
Whether you use a settlement agent's worksheet or a spreadsheet of your own, the calculation depends on a short list of inputs. These include:
- Contract price. The consideration on the deed, including any mortgage assumed by the buyer under §13-203(a)(2).
- Occupancy. Whether the home will be your principal residence for at least seven months of the first year, which controls the $100,000 recordation exemption.
- First-time Maryland buyer status. Whether every grantee qualifies under §13-203(b), which halves the state rate and shifts it to the seller.
- Contract allocation. The percentage of each tax the buyer and seller agreed to pay.
- Settlement date. Rates in effect on the transaction date govern, since Bill 17-23 applied to transactions on or after October 1, 2023.
Once you have these inputs, the math is mechanical. That said, rates can change by council action, so confirm the current schedule with the county before closing.
Budgeting Montgomery County Taxes Into Your Cash To Close
Transfer taxes are part of the zero-tolerance category under 12 CFR §1026.19(e)(3)(i), so the buyer-paid amount on your Loan Estimate generally cannot increase at closing without a valid changed circumstance. A renegotiated price after an inspection is one common reason the figure legitimately moves.
After all, these taxes are due at settlement as part of your cash to close. For a fuller picture of what else goes into your settlement statement, see our Maryland closing costs guide, and if your down payment is under 20%, our PMI removal guide explains the mortgage insurance line that sits elsewhere on the same form.
Remember that the settlement agent prepares the final figures and the lender issues the Closing Disclosure at least three business days before consummation. Compare Section E against the numbers above, and ask about any line that does not reconcile.
Sources
- Montgomery County Council, Bill 17-23 action packet and enacted text, May 9, 2023 (County Code §52-16B, effective October 1, 2023).
- Montgomery County Department of Finance, Bill 17-23 recordation tax changes.
- Montgomery County MC311, Rates for the County Transfer Tax Fee, last updated May 19, 2026.
- Maryland Code, Tax-Property §13-203 and §12-108.
- CFPB, Regulation Z §1026.38 and official interpretations to §1026.37.
This article is for informational purposes and is not financial / mortgage / contractor advice. Consult a licensed professional in your jurisdiction.