Friday, May 29, 2009

DC Proposes Tax on Co-op Sales


The Washington, DC Council has proposed taxing the sale of co-ops in the District, a move that would bring the transaction tax on co-op units into tax parity with the sale of fee simple and condominium sales. The new tax measure, buried deep in the Fiscal Year 2010 Budget Support Act of 2009, proposed by Chairman Vincent Grey, proposes to add a transaction fee to the sale of a co-op unit for both the buyer and the seller - 1.1% for sales under $400,000, 1.45% otherwise.

The sale of co-ops, technically a transfer of an economic interest rather than transfer in title, is not currently taxed by the District of Columbia; the proposed law would add an "economic equivalent" tax at the same rate as the transfer (tax on the seller) and recordation (tax on the buyer) taxes currently imposed by the District. While co-ops represent only a small fraction of real estate transactions, the District reckons it could pull in an additional $5m to $6m per annum for the next few years with the additional tax burden, compared to the $118m the District siphoned from transfer and recordation taxes last year.

The absence of recordation taxes is one of the few incentives to buying into a cooperative, most of which have more onerous rules than condominiums, carry underlying obligations to the purchaser, and bestow on the Board of Directors the power to reject applicants, all of which tends to suppress the price of co-ops below that of an equivalent condominium. The tax would take effect next year. In other words, sell now.

1 comments:

Glenn on May 29, 2009, 3:53:00 PM said...

That's just freakin' great: I bought a co-op in 2007. So now I have to not only contend with a lousy real estate market if I want to sell, but I also will face this new tax. Lovely!

Thanks for blowing up any hope I had for getting outta this thing one day, DC!

 

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