Buyers & Sellers Articles Blog How to qualify for the DC Tax Abatement program
| 09 March 2010
The DC Tax Abatement program is a program designed by the District of Columbia to help lower income homeowners purchase property. Here are some oft asked questions from agents and potential homebuyers.What does the DC Tax Abatement program entitle me to do?
Assuming you qualify, you are exempt from paying transfer and recordation taxes. This means not only are you exempt from the 1.1% (of the purchase price) recordation tax; but customarily, the seller’s 1.1% (of the purchase price) transfer tax is credited to you at settlement. You will also be exempt from paying real property taxes for 5 years beginning the next full tax year after filing.
What are the qualifying factors to get DC Tax Abatement?
The qualifying factors for DC Tax Abatement (as of January 31, 2012) are as follows:
1) The purchase price for the property must be $332,000 or less;
2) The income threshold – max gross income – must be
| Persons in household | Household income limits | |
| 1 | $59,040 | |
| 2 | $67,440 | |
| 3 | $75,900 | |
| 4 | $84,300 | |
| 5 | $91,080 | |
| 6 | $97,800 | |
| 7 | $104,580 | |
| 8 | $111,300 |
3) The property must be a principal residence; and
4) The purchaser must be domiciled in the District of Columbia.
What does “domiciled” in the District of Columbia mean?
To be domiciled in the District of Columbia you must (a) get a DC government issued ID such as a DC Driver’s license; (b) register to vote in DC; and (c) file DC Personal Income taxes. Please note: The purchaser can obtain/do the above mentioned after the purchase.
What documents are required to get the Tax Abatement?
The documents usually required are:
1) Last 2 years income taxes;
2) Last 2 W-2s;
3) Last 2 paystubs.
If there are any extenuating circumstances (i.e., gaps in your employment, self-employment, etc.) the District of Columbia may require additional documentation from you before approving the abatement application.
Who files the documents so I can get tax abatement?
The settlement agent files the required documents with the deed after closing.
I am in the military, does my housing allowance count as income despite it being non-taxable income? Do I need to change my State of Legal Residence?
Yes. The DC Recorder of Deeds looks at all sources of income, not just taxable income.
Yes, you need to be domiciled in the District of Columbia which includes filing DC income taxes. You can fill out and file a form DD2058 to change your residency to the District of Columbia.
How do I know that my tax abatement application was approved?
The settlement company handling your closing will know immediately, because your deed will go on record without transfer and recordation taxes. You will also receive a letter from the District of Columbia confirming that you qualified for the tax abatement and list the years you will be exempt from property tax.
If I qualify for tax abatement, why is my lender still collecting taxes in escrow?
The real property tax exemption does not start until the next full tax year. In other words, if you settle in April 2011 and the tax period for 2011 is October 1, 2010 through September 30, 2011, you will not be given the exemption until the 2012 tax period. You will be required to pay real property taxes for April through September 2011. Your real property tax exemption will start 2012 and finish 2017.
If your questions about tax abatement have not been answered here,
please feel free to contact me 202.362.1500 ext 1514.
Comments
Within ninety (90) days post the abatement acceptance and approval, the DCOTR, via its Maps & Title Department, will send a letter to the new owner, to the premises confirming the said approval and the acceptance.
The Owner should be reminded to immediately provide the Letter to their Mortgage company for any escrow/mortgage adjustments.
Thanks in advance
Hi Greg, Thanks for your question. The most recent information we have from the DC Recorder of Deeds states $332,000 is the current price threshold. I updated our website at the end of January 2011 to reflect the new threshold.
I asked this article's author, Catherine Schmitt, what happens if a homebuyer's income rises above the income threshold during the five-year abatement, and she had this to say:
"The Office of Tax and Revenue does not presently audit owners as to their income after the first application and acceptance of the application. I do not know of any movement toward this type of audit, but there is a caveat on all of their paper work that they reserve the right to audit within 3 years of the initial application and purchase of the property – whichever is later."
I hope this helps clarify DC Tax Abatement for you. If you have other questions, please feel free to contact us or drop another line here on the blog.
PERSONS IN HOUSEHOLD, HOUSEHOLD INCOME LIMITS
1. $ 56,820
2. $ 64,920
3. $ 73,020
4. $ 81,820
5. $ 87,660
6. $ 94,140
7. $ 100,620
8. $ 107,100
The table is at otr.cfo.dc.gov/.../... under form ROD 9.
Thanks.
Check out EJ Flynn if you haven't already. They handle a large share of co-op closings in DC and can explain it to you. In short, in a co-op scenario you are transferring shares of stock in a housing corporation that grant the stockholder the right to occupy his unit, whereas in a condo or house scenario you are purchasing title and legal ownership of an entire property.
(I'm just the marketing director, but I bought a co-op a couple years ago and ran into the same problem.)