HB1213 overhauls Maryland’s State transfer tax by establishing a tiered rate schedule that varies by property type (single‑family, deed‑restricted multifamily, other multifamily, and nonresidential) and by transaction size. The bill also defines “affordable” and a narrow definition of “deed‑restricted property,” shifts transfers of controlling interests in Low‑Income Housing Tax Credit (LIHTC) developers onto the new tiered schedule, and preserves a reduced 0.25% seller‑paid rate for qualifying first‑time Maryland home buyers.
This matters for anyone who closes real estate transactions in Maryland. The new brackets change closing costs across the market, lower tax exposure for some deed‑restricted and lower‑priced residential sales, and create new compliance and valuation questions for entity transfers, high‑value deals, and title agents calculating tax at recording.
The bill takes effect for instruments recorded on or after July 1, 2026.
At a Glance
What It Does
The bill replaces a single or flat transfer tax approach with multiple percentage brackets that depend on property type and the sale price or consideration. It expressly defines “affordable” and a 15% deed‑restriction test for certain multifamily projects and applies the tiered schedule to transfers of controlling interests in LIHTC developers rather than a fixed 0.5% rate.
Who It Affects
Buyers and sellers of single‑family homes, owners and purchasers of multifamily and deed‑restricted properties, commercial real estate parties, developers using LIHTC structures, title companies, and county recording/tax offices that collect the tax.
Why It Matters
The measure redistributes transfer tax burdens across transaction types and price points—reducing tax on many affordable and deed‑restricted transactions while maintaining or increasing rates on some larger commercial and luxury transfers—thereby altering incentives for deal structure, pricing, and development of affordable housing.
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What This Bill Actually Does
HB1213 inserts new definitions and a multi‑tiered tax matrix into Section 13‑203 of the Tax‑Property Article. It adds two working definitions: “affordable,” which means housing costs not exceeding 30% of household income, and a narrow statutory definition of “deed‑restricted property” limited to multifamily buildings that set aside at least 15% of units for households at or below 80% of area median income.
Those definitions matter because they determine which lower tax columns apply.
The core change is that the State transfer tax becomes a sliding set of percentage rates that differ by property class and by the dollar size of the consideration shown on the instrument of writing. Single‑family residential sales, deed‑restricted multifamily, other multifamily, and nonresidential transactions each get their own series of brackets and top rates.
The bill also clarifies that “consideration” includes any mortgage or deed of trust assumed by the buyer, so transfers that involve debt assumption will reflect that amount when computing tax.Crucially for affordable housing transactions, deed‑restricted multifamily receives comparatively low rates even at high sale amounts; the statute therefore provides a direct tax incentive for maintaining qualifying deed restrictions. For transfers of a controlling interest in a real property entity that developed property under Section 42 (LIHTC), the bill replaces the flat 0.5% charge and subjects those transfers to the new applicable tiered rates in subsection (a).
That reclassification changes the tax stakes for investors buying or selling ownership interests in LIHTC projects.The measure keeps and refines the first‑time Maryland home buyer rule: a sale to a qualifying first‑time buyer who will occupy the home as a principal residence triggers a 0.25% transfer tax rate that the seller must pay, and the buyer (or the buyer’s agent) must submit a sworn statement attesting to eligibility. The act is explicit about effective timing: it applies to instruments recorded on or after July 1, 2026, so parties and title agents should plan to apply the new brackets for summer 2026 closings.
The Five Things You Need to Know
Single‑family residential sales use a seven‑bracket scale: 0.25% (< $300,000), 0.375% ($300k–<$400k), 0.5% ($400k–<$650k), 0.75% ($650k–<$800k), 1.0% ($800k–<$1M), 1.25% ($1M–<$3M), and 1.5% (≥ $3M).
Deed‑restricted multifamily receives sharply lower brackets: 0.25% (< $1M), 0.375% ($1M–<$10M), and 0.5% (≥ $10M).
Transfers of a controlling interest in a real property entity that developed property under Section 42 are taxed at the applicable tiered rate under subsection (a) rather than a flat 0.5%.
A sale to a qualifying first‑time Maryland home buyer who will occupy the home is taxed at 0.25% and the transfer tax is payable entirely by the seller; the buyer or the buyer’s agent must submit a sworn eligibility statement.
The statute expressly includes any mortgage or deed of trust assumed by the grantee in the taxable consideration; the act takes effect for instruments recorded on or after July 1, 2026.
Section-by-Section Breakdown
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Definitions: “affordable” and “deed‑restricted property”
This subsection adds two operative definitions. “Affordable” is tied to a 30% of household income standard rather than an arbitrary price point, which links the statute to income metrics. “Deed‑restricted property” is narrowly defined to mean multifamily residential property that dedicates 15% of units to households at 80% or less of area median income. Practically, this creates a statutory gatekeeper: only projects meeting the 15%/80% test qualify for the deed‑restricted tax column, so developers and counsel will need to document and certify ongoing unit set‑asides to secure favorable tax treatment.
Single‑family residential tiered rate schedule
The bill establishes seven dollar bands for single‑family residential transfers with increasing percentage rates tied to the sale consideration. Title companies and settlement agents must match the instrument’s consideration to the correct band; because the bands start at $300,000 and escalate to a top rate at $3,000,000, many ordinary detached home transactions will pay substantially different percentages than under the old structure. Parties should review deed language and financing arrangements to confirm whether assumed mortgages push a transaction into a higher bracket.
Deed‑restricted and other multifamily rate columns
The statute creates a favorable column for deed‑restricted multifamily—low fixed percentages that remain modest even at seven‑figure considerations—while other multifamily properties have a separate, steeper multi‑band schedule. That bifurcation directly incentivizes preserving affordability covenants for at least 15% of units, but it also requires clear evidence at recording that the property qualifies as deed‑restricted, which may increase documentation demands at closing and risk disputes about eligibility.
Nonresidential (commercial) tiered schedule
Commercial transfers get their own bands with a top rate reaching 1.5% for very large deals (≥ $40 million). Because these brackets cover large transaction sizes, the practical impact falls on institutional buyers and sellers of office, retail, industrial, and mixed‑use assets—parties that frequently structure deals through entities and may reconsider whether to sell assets directly or sell entity interests.
Controlling interest transfers, consideration rules, and valuation mechanics
The bill replaces the prior flat 0.5% rate for transfers of a controlling interest in a real property entity that developed LIHTC property with the applicable tiered rates under subsection (a). It also reiterates that taxable consideration includes any mortgage or deed of trust assumed by the grantee. Together, these mechanics change how entity sales are taxed: buyers and sellers of entity interests will need valuation methodologies that produce a transaction consideration consistent with the bracket system, and tax counsel should anticipate negotiation over how much assumed debt is included when computing the tax base.
First‑time buyer exception and effective date
The statute retains a targeted relief mechanism for first‑time Maryland home buyers: for qualifying sales where the purchaser will occupy the residence, the transfer tax is set at 0.25% and the seller must pay it. Eligibility requires a sworn statement from the grantee or an agent who attests to conducting a diligent inquiry. Finally, the act becomes effective July 1, 2026, and applies to instruments recorded on or after that date, giving practitioners a clear cut‑off for when to apply the new brackets.
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Explore Housing in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- First‑time Maryland home buyers (and their purchasers): the statutory 0.25% transfer tax—paid by the seller—lowers the buyer’s immediate tax burden on qualifying owner‑occupied purchases, potentially improving affordability at the point of sale.
- Owners and purchasers of deed‑restricted multifamily projects: the deed‑restricted column offers comparatively low rates even for high‑value transactions, reducing transfer costs for projects that reserve at least 15% of units at ≤80% AMI.
- Buyers of lower‑priced single‑family homes: transactions under the lower brackets (notably under $300,000) enjoy one of the lowest percentage rates in the schedule, benefiting modest‑priced market segments.
- Title companies and settlement agents with high affordable‑housing volumes: clear statutory definitions and rates simplify billing for qualifying deed‑restricted deals and may streamline competitive offerings for these niche transactions.
Who Bears the Cost
- Sellers in transactions to qualifying first‑time buyers: the bill explicitly assigns the entire 0.25% transfer tax to the seller in those deals, which can increase seller‑side closing costs.
- Sellers of high‑value commercial and luxury residential property: top brackets (up to 1.5%) raise tax exposure on very large transfers, increasing transactional costs for institutional and private sellers of billion‑dollar‑plus portfolios or luxury homes.
- Investors and advisors handling LIHTC entity sales: moving controlling interest transfers onto the tiered schedule creates valuation uncertainty and potential higher tax bills, along with added compliance work to document transaction consideration.
- County recording offices and title agents: the multi‑bracket system raises administrative complexity at calculation and collection time, increasing the risk of errors, refunds, and audits without updated software and staff training.
Key Issues
The Core Tension
The central dilemma is how to target lower transfer taxes to encourage affordability without unduly eroding the revenue base or creating loopholes and administrative burdens; the bill reduces tax on select affordable and lower‑priced residential transactions while relying on a complex bracket system that invites valuation fights and strategic deal structuring.
The bill targets tax relief to particular transactions (deed‑restricted multifamily and many lower‑priced single‑family sales) while raising or preserving rates on large commercial and luxury transfers. That targeting creates a policy tradeoff: it encourages preservation of deed restrictions and first‑time home purchases but also reduces the tax base on some high‑density affordable projects and lower‑priced homes, with uncertain net revenue effects.
Predicting fiscal outcomes requires granular modeling of which deals shift between brackets and how sellers adjust pricing at closing.
Operationally, the many brackets and categorical distinctions invite compliance friction and valuation disputes. The inclusion of assumed mortgages in the taxable consideration is sensible from a base‑broadening perspective but creates room for disagreement about what portion of assumed debt reflects bona fide additional consideration versus financing structure.
The deed‑restriction definition is relatively narrow (15% at ≤80% AMI), which both limits the population of qualifying projects and raises implementation questions about who verifies ongoing compliance with affordability covenants at or after recording. Finally, moving LIHTC entity transfers from a flat 0.5% to a variable scheme reduces predictability for investors and could incentivize restructuring transactions (for example, shifting sale form between asset vs entity sale) to optimize tax outcomes.
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