A bill to decrease Delaware’s realty transfer tax from 4% to 3% was released from the House Administration Committee Wednesday.
Introduced by Rep. Bill Bush, D-Dover, House Bill 358 would make law of something Rep. Mike Ramone, R-Pike Creek South, has been preaching for years: reducing the cost of Delaware’s real estate transfer tax after it was increased during financially difficult years.
The realty transfer tax is levied on the purchase price of the home and is usually split between the buyer and seller, unless otherwise negotiated.
Delaware currently has the highest realty transfer tax in the nation.
In 2017, Delaware’s realty transfer tax was effectively raised from 3% to the present level of 4%. The move was made as part of a revenue-generating package to bridge a major budget gap.
The move to cut the tax comes after two years of raging sales in the housing market, leading to tax windfalls for state and local governments.
The market is also facing rising interest rates designed to slow inflation. That has some real estate experts expecting a slow down in sales, partly because of the lack of new housing.
The revenue from the 4% realty transfer tax is split between state and local governments.
The state currently gets 62.5% of the proceeds, with the local presiding government collecting the remaining 37.5%.
The new bipartisan bill would reverse the state’s 2017 tax hike, restoring the effective combined realty transfer tax to 3%.
Under the measure, only the state’s share of the revenue would be impacted. The revenue flowing to local governments from home sales would be unchanged.
According to Long & Foster Real Estate, the median price of a home sold in Delaware as of February was $335,000.
HB 358 would reduce the transaction cost for the sale of such a home by almost $3,400.
Based on the latest estimates from the Delaware Economic and Financial Advisory Council, HB 358 would allow homebuyers and sellers to collectively retain more than $100 million annually.
Rep. Valerie Longhurst, D-Delaware City, said she’d support the bill on the House floor if an amendment is attached to make the bill sunset, or expire, after a number of years.
House Speaker Pete Schwartzkopf, D-Rehoboth Beach, voted to release the bill but warned it would have to go through Appropriations Committee because the Senate has already passed the fiscal year 2023 budget and the House hopes to pass it Thursday.
All five members of the House Administration Committee voted to release the bill.
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