No consideration deed transfers are awesome because you can use them to avoid paying transfer tax and recordation taxes in certain situations. Neat! The problem is that these situations are actually very limited.
What Is “No Consideration”?
You would think that “no consideration” means transferring a home for $0.00. But it doesn’t. It means transferring a home for “value.” An existing mortgage is considered consideration because the grantee is assuming the mortgage. So you’ll be taxed on the amount of the existing mortgage if there is a mortgage on the property even if it’s sold for $0. Fair enough.
But What If My House Is Owned Free & Clear?
I know what you’re thinking. But Brian, what if the home is owned free and clear and it’s gifted for $0? Surely, I won’t have to pay transfer taxes right? Wrong! Maryland will use the assessed value of the home to calculate transfer and recordation taxes. Maryland can’t be stopped!
This is why I think the term no consideration deed transfers is more confusing than helpful to me. Perhaps a more helpful term of art can be used to indicate situations in which a deed can be transferred without paying transfer taxes or recordation taxes.
Does this mean we always have to pay transfer and recordation taxes?
No, it does not. The only way to avoid transfer taxes in Maryland is no consideration deed transfers that qualifies for both State and County tax exemptions. Here are examples of State transfer tax exemptions:
- Spousal Deed – Deed between spouse, former spouse, or domestic partner;
- Trust Deed – Deed between an estate or trust and its beneficiaries;
- Child Deed – Deed between parents, children, step-children, grand children, or step grandchildren;
- Siblings Deed – Deed between siblings and step-siblings;
- Related Business Deed – Transfer between a parent business entity and its subsidiaries;
- Corporate Conveyance – Transfer from business to its original member upon dissolution;
- Real estate enterprise – Transfer from a real estate enterprise (persons or people doing real estate business) to single company;
But What About County Tax Exemptions?
Unfortunately, I can’t go through every county tax in Maryland. But I can go through what I think is the most important rule. Some Counties incorporate the State transfer tax exemptions and others don’t.
For example, Anne Arundel County incorporates the Maryland State exemptions (and also has its own exemptions on top of that). Prince George’s County does not incorporate the Maryland State transfer exemptions but does specifically enumerate that it allows for tax-free transfers between husband and wife. Just about everything else is taxed.
So no consideration deed transfers between siblings in Anne Arundel County will be exempt from State, Transfer, and county recordation and transfer taxes. But the same deed in Prince George’s county will be exempt from State recordation and transfer taxes but not county taxes.
This is why I think one of the most fundamental rules to know is whether or not the county incorporates the State taxes.
Need Help With No Consideration Deed Transfers in Maryland?
Do not hesitate to contact The Pendergraft Firm, where no good deed goes unrecorded. We can help assess whether or not you qualify for a transfer tax exemption or estimate all transfer and recordation taxes if you do not.
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