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Effective August, 2017, the state realty transfer tax rate was increased from 1.5% to 2.5% for property located in counties and municipalities that impose a realty transfer tax. If the property is located in an area that does not impose a local transfer tax, the state realty transfer tax rate is now 3%. Realty transfer taxes are typically shared equally by the buyer and the seller. Effective immediately, all first-time home buyers are entitled to a one-half percent (0.5%) reduction in the rate paid by the buyer (which for most buyers will result in a reduction from 1.25% to 0.75%), which may be claimed at the time of closing. The maximum value of this reduction is capped at $2,000 (and may only apply to the first $400,000 of property value).
To qualify for the reduced rate, the real estate must be purchased by one or more individuals who have never held any direct legal interest in residential real estate, and who intend to live in the property as their principal residence within 90 days after the closing. If you meet these qualifications, the attorney handling the purchase of your new home will reflect the reduced rate on the form that is prepared and signed at closing.
Additionally, individuals who purchased their first home after August 1st 2017 and paid the current Realty Transfer Tax rate of 2.5% (1.25% assessed on the buyer and 1.25% assessed on the seller) may be entitled to request a refund. The current realty transfer tax rate of 2.5% did not apply to those who had entered into a contract for the sale of real estate entered into before August 1, 2017. As such, anyone who purchased a home in a transaction that closed after August 1, pursuant to a contract dated before August 1, paid a lower rate and would therefore not be entitled to a refund.
To request a refund, please complete Form 5405 and submit it directly to the Delaware Division of Revenue. We will process the refund request and issue the refund directly to you.
FAQs: First-Time Home Buyer Tax Credit
Form 5405 - Claim For Refund of Realty Transfer Taxes by First Time Home Buyer
Form 5402 - Realty Transfer Tax Return and Affidavit of Gain and Value
Form 5402, Schedule 1 - First Time Home Buyer's Credit