DC Tax Abatement: No Property Taxes for 5 Years

• May 19, 2010
• 12 Comments

by Joe Marhamati

Imagine buying a house in DC and one of the perks being that you didn’t have to pay property taxes for five years. The DC Tax Abatement program allows middle-income Washingtonians just that opportunity.

Among the many purchase incentives, low-income homeownership programs, and government first-time buyer credits, the DC Tax Abatement program is often overlooked despite being one of the most attractive options for prospective buyers.

The program offers an amazing five-year exemption from paying property taxes on eligible buyer’s homes. In addition, it exempts the purchaser from the 1.1% transfer and recordation taxes paid at closing, and provides the possibility of an additional 1.1% credit from the seller. Ordinarily, a buyer and seller exchanging property in the District of Columbia each have to pay 1.1% of the purchase price in recordation and transfer fees to the city. If you know that you’re going to apply for the tax abatement, you can ask the seller to credit you the 1.1% they would otherwise be paying. For a $300,000 unit, this would save the buyer $3,300 in their own transfer fees, and upwards of $6,600 depending on the transaction. On top of that, over the five years during which the buyer would otherwise be paying property taxes, the savings would be a whopping $9,881.25. In short, the potential to drastically reduce one’s tax burden at the front-end, in terms of closing costs, and over the course of the first five years of ownership is significant.

The catch? The purchase cannot be greater than $319,920, and income limits to qualify begin at $53,760 for a single-person household and increase by approximately $7,680 for each additional person. Also, the purchase must be for a principle residence, and the buyer must be a current DC resident. Despite these caveats, for a buyer with a modest income, the program could quite literally amount to a better deal than the federal $8,000 homebuyer credit and the $5,000 DC first time homebuyer credit combined.

In most cases your real estate agent and title company can assist you in applying for the program, or you can do so yourself by filling out Form ROD 9 on the DC Office of Tax and Revenue website.

One minor catch to be aware of: the five-year tax exemption begins in the fiscal year after your purchase. This means that if you close on October 1st, you are responsible for the entire first year’s property tax liability but nothing the following five years. However, if you close on September 30th, you pay literally nothing for the first five years.

This article originally published at http://dc.urbanturf.com/articles/blog/dc_tax_abatement_no_property_taxes_for_5_years/2089

12 Comments

1. jj said at 11:19 am on Thursday May 20, 2010:

   let’s be real…54k is poverty level in dc and i’m not sure someone who makes 54k would buy a 319k house or would qualify. maybe the tax office needs to come out under the 1980 federal pay scale and get a grip on reality with housing prices. revised to 2010, this should be 110/150k limit and 700k house.

1. Tiffany said at 11:24 am on Thursday May 20, 2010:

   I closed in late October and I didn’t apply. is it too late for me to apply for this program?

1. Karen Healy said at 11:30 am on Thursday May 20, 2010:

   Is this exclusively for first time homebuyers?

   Thanks,

1. Nicole said at 11:37 am on Thursday May 20, 2010:

   @Tiffany—As long as you are eligible for the first 5 years you are in your home you should qualify.  You should just apply—talk with your title company.

   @jj—I think plenty of people live in DC for 54K or less and they probably can’t but a $300K plus home but there are condos and other options available.

1. gheart said at 11:51 am on Thursday May 20, 2010:

   You don’t have to reside in DC prior to buying a home in DC in order to qualify.

1. Pat said at 12:31 pm on Thursday May 20, 2010:

   Are sure this program still exists?  I purchased a condo in 2006 and applied and didn’t receive it and I my salary was about $53,000 back then.  However, I have a girlfriend that purchased a house in 1998 or 1999 and did receive it.  When I purchased my condo, she told me that she thought the program was suspended or did exist anymore.

1. nicole said at 1:32 pm on Thursday May 20, 2010:

   Yup.  Pretty sure it still exists.  I would apply through the title company though—and go with one that is familiar with the program.  I know people who got into their homes in 2007 that have not had to pay taxes.  And title companies in the know are still pushing the program.

1. LPSW said at 2:47 pm on Thursday May 20, 2010:

   I’m under contract for a condo right now (buying for under 200K, so it possible) and am planning on using this tax abatement. It does still exists and it is not just for first time home buyers or current DC residents, as far as I know.

   Pat—the reason you probably didn’t qualify back in 2006 was that the income level was lower then. 50 or 51K. The income level goes up each year with inflation.

1. lauren said at 3:19 pm on Thursday May 20, 2010:

   @jj, sure $54k isn’t a high salary for this area (but it’s not poverty either, unless you think not being able to shop at Whole Foods = poverty), but that’s the point - if they gave it to everyone DC would be broke.

   Anyway, I make too much too qualify for this but I think it sounds like a good program.

1. Joe Marhamati said at 4:30 pm on Thursday May 20, 2010:

   Commenters are correct. I misstated in saying that you have to currently be a resident, what it should say is that you have to to be domiciled in the District of Columbia, meaning you must get a DC government issued ID, register to vote in DC, and file DC Personal Income taxes.  These can be done after the purchase.

1. gheart said at 3:51 pm on Saturday May 22, 2010:

   Just to clarify, you can still get the transfer tax credit when you close even if you don’t have the ID, etc. To get the tax exemption for 5 yrs you muct register to vote, etc. by the beginning of the fiscal year.

1. TOYA said at 5:19 pm on Wednesday July 21, 2010:

   Mr. Marhamati or anyone HELP ME PLEASE

   My title company, Session Title, failed to apply for my DC Property Tax Abatement when they recorded my deed even though I qualified. My contract stated I was to receive the 1.1% seller credit as well.

   I applied, was approved and received a refund for my recordation taxes but DC is refusing to return the sellers transfer tax that my contract stated I’d get credit for. They simplely said they do not return those payments.

   Since the title company made the mistake in not filing I expected them to recify it but they have refused. They said the lender is responsible to tell them I qualify. The lender said that it is the title company’s responsibility to test if I qualify. 

   What should/can I do?

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