Howard County First-Time Homebuyer Tax Breaks: What You Qualify For and What You'll Save

If you've never owned a Maryland home that you lived in, the state cuts its transfer tax in half and makes the seller pay all of it, so your share goes to zero. On a $500,000 Howard County home, that saves a typical buyer about $1,250.

Howard County's own transfer tax exemption is narrower. It covers first-time Howard County homebuyers who are Howard County police officers, deputy sheriffs, fire and rescue members, or certificated teachers with the Howard County Board of Education. For them the savings are much larger, with a three-year occupancy commitment attached.

First-time buyers are some of my favorite people to work with. Too often, the closing numbers show up late in the process and the excitement dips a little, because nobody mentioned there would be taxes on top of the down payment. I'd like you to see those numbers now, while you can still plan for them.

The three taxes on a Howard County purchase

When a home changes hands in Howard County, three taxes come due at closing. In Maryland, closing is called "settlement."

The state transfer tax is 0.5 percent of the price, the same anywhere in Maryland. Howard County adds its own transfer tax of 1.25 percent, which sits near the top of what Maryland counties charge. Then there's the recordation tax, the fee for officially recording your deed, the document that makes the house yours. In Howard County that's $2.50 for every $500 of the price, or about 0.5 percent.

Maryland's default is that buyer and seller split all of this evenly. Your contract can say otherwise, which is something we'd talk through before you write an offer.

Source: Howard County Department of Finance, Recordation Tax

Meet two buyers

Say you and your partner are renting in Columbia and you've found a $500,000 townhouse. Neither of you has ever owned a home in Maryland. On an even split, your share of those taxes would normally be $5,625. Because you're both first-time Maryland buyers, the state portion comes off your side entirely, and your share drops to $4,375.

Now say you're a certificated teacher employed by the Howard County Board of Education, buying that same townhouse as your first home in Howard County. You also qualify for the county exemption, and your share drops to $1,250.

Here is your share on a $500,000 home, assuming an even split:

• Repeat buyer: $1,250 state transfer tax + $3,125 county transfer tax + $1,250 recordation tax = $5,625
• First-time Maryland buyer: $0 state + $3,125 county + $1,250 recordation = $4,375
• First-time Howard County buyer who is a county teacher, officer, deputy, or firefighter: $0 state + $0 county + $1,250 recordation = $1,250

For qualifying county employees, the full $6,250 county transfer tax on the deed is exempt, and how that's divided between you and the seller depends on your contract. Your settlement company can walk you through it.

How the state break works

When a first-time Maryland homebuyer buys a home to live in, the state transfer tax rate drops to 0.25 percent and the seller pays all of it.

If you're wondering whether sellers push back on this: on an even split, the seller pays about the same amount either way. Your half just goes away.

You qualify if you have never owned a home in Maryland that you lived in as your main residence. Owned a condo in Virginia? That doesn't count against you for this one.

If you're buying with someone else, both of you have to qualify. The one exception is a co-signer on the mortgage who won't be living in the home. Each buyer signs a statement under oath as part of the closing paperwork.

Source: Maryland Code, Tax-Property § 13-203

For Howard County teachers, officers, and firefighters

This is the break I'd want every county teacher and first responder to hear about before they start house hunting.

Howard County exempts you from county transfer tax if you're buying your first home in Howard County and you are a Howard County police officer or deputy sheriff, a Howard County fire and rescue services member, or a certificated professional teacher employed by the Howard County Board of Education. If you're in one of those roles but have owned in Howard County before, you still get a reduced county rate, listed on the county's form as 0.7 percent.

There are conditions. You have to live in the home continuously for at least three years. If you move out before then, or leave that job, you're required to notify the Howard County Office of Finance within seven working days and pay the county transfer tax after all. Your employer, either county Human Resources or the Board of Education, also has to sign off on the form before closing, so start that early.

My advice: if you're settled in the job and planning to stay put, claim it without a second thought. If there's a real chance you'll take a position in another county or relocate in the next couple of years, it's still worth claiming, but go in knowing the tax could come back as a bill, and put a reminder on your calendar so you don't miss that seven-day notice.

Source: Howard County Transfer Tax Exemption and Rate Reduction Affidavit · Maryland General Assembly, HB 223 (2018)

What these breaks don't cover

Even with every exemption you qualify for, closing isn't tax-free. The recordation tax generally still applies, along with lender fees, title insurance, and prepaid property taxes and homeowners insurance. Ask your settlement company whether anything else applies to you.

The good news is you don't have to file anything with the county yourself. Your settlement company prepares the deed and the forms. Your job is to tell your agent, your lender, and your settlement company that you're a first-time buyer as early as you can, and then read what you sign.

Help with the down payment

Howard County and Maryland also offer programs that can help you get in the door:

• Settlement Downpayment Loan Program (SDLP): a Howard County loan program for down payment and settlement costs.
• Moderate Income Housing Unit (MIHU) Program: homes set aside for moderate-income buyers, with an open enrollment period, so check the timing before you shop.
• Maryland Mortgage Program: state financing and down payment assistance.
• Homebuyer education: some programs require a course, and Howard County lists homebuyer education with its homeownership resources. It's worth doing early either way.

Source: Howard County Homeownership Opportunities · Maryland Mortgage Program

Your first-time buyer checklist

• Before you start touring homes: confirm you qualify for the state break, check the county exemption if you work in a qualifying role, look into SDLP and MIHU timing, and talk to a lender about what you can borrow.
• When you write an offer: decide how the taxes are split on purpose.
• Before closing: make sure your settlement company has the right forms, and get any employer sign-off done early.

Let's figure out what you qualify for

Buying your first home should feel exciting, and a big part of that is knowing your numbers before you fall in love with a house. If you're looking anywhere in Howard County, from Ellicott City to Columbia to Maple Lawn, reach out and we'll sit down and map out exactly which of these breaks and programs you qualify for. Then you can start touring homes with a real number in your head.

This article is general information, not tax or legal advice. Rates and rules change. Confirm current figures with the Howard County Department of Finance, your settlement company, and your tax advisor.