Transfer tax is a tax imposed by the state of Maryland when the controlling interest in a piece of property changes hands. The state charges a set rate of transfer tax and the counties and sometimes even the municipalities can charge for a piece of the sale.
Transfer tax rates are .5 percent of the amount paid for the property. However, the state does provide exemptions from this, particularly for first-time home buyers, who can have their transfer tax reduced to .25 percent and also have the seller pay the tax, as long as the home buyer is purchasing an improved property (facts which the state makes the home buyer swear to under oath). Counties can also impose their own tax rates, although not all do.
Transfer tax is paid to the Maryland Circuit Court by the home buyer. The payment is received and recorded and the court gives the home buyer a proof of payment.
Distribution of Revenue
Collected transfer tax revenue is used to pay for a myriad of things. The state or county can use the money to pay off bonds issued for the government to pay for special projects. The money can also go to open space programs, land preservation funds, conservation funds or to the government's general fund. Surplus funds are typically allocated to either the state's general fund or to special programs.