I have often remarked, half in jest, that my nearly thirty years as a settlement attorney have made me something of a tax collector — and the observation is not without merit. Real estate transactions generate substantial revenue through transfer and recordation (“transaction”) taxes as well as property taxes. In recent months, I have identified concerning issues and policies in each of the three jurisdictions comprising the greater Washington region: the District of Columbia, Maryland, and Virginia
District of Columbia
The District’s Office of Tax and Revenue is required by law to assess all properties annually at “market value.” In recent years, however, a significant number of properties have been over-assessed. Fortunately, the District maintains a relatively accessible appeals process, and owners are well advised to review their assessments carefully upon receipt — typically in late February — and to familiarize themselves with the procedures for contesting them. To the District’s credit, residential tax rates remain reasonable: $0.85 per $100 of assessed value, increasing to $1.00 per $100 for values exceeding $2.558 million.
A more serious concern involves the vacant property designation and the manner in which vacancy exemptions are administered. This tax period, a number of former clients received bills taxing their owner-occupied residences at the vacant rate of $5.00 per $100 of assessed value — a substantial increase over standard residential rates — without any prior notice from the District beyond the bill itself. This is despite established procedures requiring notice and an opportunity to contest such a designation, procedures the District did not follow in these instances. A related and recurring issue arises when a vacancy exemption expires: the property automatically reverts to vacant status, often affecting estate sales or newly constructed or renovated properties, until the owner arranges an inspection and the Department of Buildings formally reclassifies the property as occupied. Significant amendments to the District’s vacant and blighted property tax laws are scheduled to take effect this October under DC Law 26-41. These changes, together with a more concerted effort by the Department of Buildings to reclassify affected properties, should help mitigate these problems.
Maryland
Having resided in Montgomery County for most of my life, I can attest that, notwithstanding its considerable merits, the county’s real estate tax burden — both transactional and recurring — is substantial. Additional recordation tax tiers introduced in 2023 now impose $13,360 in recordation tax alone on a $1 million owner-occupied property (for combined transfer and recordation taxes of $28,360), and $36,060 on a $2 million property (combined taxes of $66,060). Although these taxes are typically split equally between buyer and seller (absent an agreement otherwise), each party’s share nonetheless amounts to nearly 1.45% of the purchase price at the $1 million level, over 1.5% at $2 million, and over 3.5% at $3.5 million — figures that render Montgomery County the most expensive jurisdiction in the region for higher-value transactions, and among the most expensive in the country.
It might be argued that owners of high-value property can readily absorb these costs; this argument, however, disregards the additional burden such taxes place on residential development more broadly. Property tax rates in the county range from 1.15% to 1.17%, exclusive of municipal taxes and special service charges. Further compounding the burden, the County Council voted 9-2 in May 2026 to eliminate the Income Tax Offset Credit (“ITOC”), a component of the Homestead program that had reduced Maryland taxes for owner-occupants of principal residences.
Virginia
Virginia remains, by a considerable margin, the least expensive jurisdiction in the region with respect to transaction taxes, even accounting for Northern Virginia’s Congestion Relief Fee (enacted 2013) and WMATA Capital Fee (enacted 2018). The seller (Grantor) is taxed at $3.00 per $1,000 of the sales price or assessed value, whichever is greater, while the buyer (Grantee) is taxed at $3.334 per $1,000 of the aggregate sales price or assessed value, plus any associated mortgage or deed of trust. Property tax rates and assessments vary considerably across Virginia; for 2026, rates stand at $1.12 per $100 of assessed value in Fairfax County, $1.135 in the City of Alexandria, and $1.053 in Arlington County. While these comparatively low rates make Northern Virginia an attractive jurisdiction, owners should also account for the personal property tax (commonly referred to as the “car tax”), which ranges from $2.00 to $5.00 per $100 of assessed value for vehicles, motorcycles, boats, and trailers.
Our firm recently encountered a troubling matter involving a condominium conversion in Northern Virginia. Under applicable practice, the jurisdiction does not begin taxing individual units until the year following completion of the conversion (once the declaration and bylaws have been recorded). In this case, that resulted in the whole building having one consolidated tax bill. This timing, while requiring careful explanation to buyers and lenders, is not itself objectionable. Nor was it unexpected that the taxing authority would assign a value to the building as it existed on January 1, with a supplemental bill to follow once construction was complete and certificates of occupancy issued. The difficulty lies in the fact that the January 1 assessment exceeded the estimated aggregate sales prices of all units combined, not with standing that no unit could lawfully be conveyed or occupied as of that date. The subsequent supplemental bill for the second half of the year exceeded the original assessment by a further 6.5%. It remains difficult to reconcile how an assessment predating any lawful conveyance or occupancy could exceed projected sales prices.
Of greater concern, the affordable dwelling units (“ADUs”) within the development were not assessed at the prices for which they could be sold, but rather at values derived from comparable market-rate units. The resulting disparity was substantial: in some instances, the actual sales price of an ADU amounted to only 25% of the assessor’s valuation. While Virginia imposes no statewide inclusionary zoning mandate, local requirements typically require affordable units to constitute between 6% and 10% of total units.
The Answer
I do not claim to have a comprehensive solution. In fairness, all of our jurisdictions have an array of programs intended to promote homeownership and promote affordable housing, so it’s not all bad news. However, the issues described above represent only a sample of the difficulties confronting the real estate community across our jurisdictions, which also include the recapture of prior tax reductions and the considerable variation in transaction and property tax regimes (to name a few).
In my extensive experience working with real estate developers, one observation has remained constant: the cost of residential development continues to rise significantly. With respect to taxation, each jurisdiction would be well served to adopt policies that encourage development, rather than imposing prolonged holding periods, delayed permitting, and additional costs and obstacles. Development activity — through the goods purchased, employment generated, and taxes collected in the course of construction, conversion, and rehabilitation — merits greater consideration, particularly in light of the increased property tax revenue and the income and sales tax contributions such development ultimately produces.
Given the numerous and jurisdiction-specific pitfalls described above, it is essential that buyers, sellers, and the broader real estate community consult experienced professionals familiar with these markets for guidance with your real estate transactions.
