District of Columbia Tax Abatement Program

Deidre Brown your settlement agent serving the District of Columbia, Maryland and Virginia. Today we’re going to talk about the District of Columbia’s Real Property Tax Abatement. The official name is the Lower Income Homeownership Tax Abatement. 

If you are a buyer and are purchasing a property in the District of Columbia as your principal residence and fall within the income guidelines you can request that that you are not assessed real property taxes for five years. In addition, the buyer will not have to pay the 1.1% recordation tax and the seller will need to give the buyer a credit, with lender approval, for the 1.1% transfer tax. 

This is a great tax abatement program for those who qualify.  In order to qualify the property must be owner-occupied. You have to meet income requirements and the property value must be less than $484,000, for the 2020-2021 tax year. This number changes every October 1st because this is when the tax year for the District of Columbia starts. The income ranges are pretty generous for the 2020-2021 tax year. You qualify if you are a one-person household and your adjusted gross income is $66,900 or less and a two-person household has to make under $76,440. Eligible income thresholds go all the way up to  $126,120 for an eight-person household.  

If you’re purchasing a property in an economic development zone then the income requirements are a little higher. For a one-person household, it is $97,000 and for a two-person household, it is $110,900 and goes all the way up to $147,250. 

This tax abatement is normally applied for a settlement.  You will work with your title company to complete the application and provide the required supporting documents.  Your title company will submit the application when they record the deed and deed of trust.  

The deadline to apply is September 1st and then the abatement will go into effect as of  October 1st of any tax year.  Once you receive your letter stating that you have been approved for the tax abatement you need to make sure you send that letter off to your lender. Especially if your lender is escrowing your property taxes so that they know that you now are receiving an abatement. 

If you have more title related questions please reach out to us at lexicontitle.com