As a homebuyer, it is important to be aware of programs you can benefit from in order to reduce the overall cost of the process of buying a place to live.
The DC Tax Abatement program is one such opportunity that a homebuyer can and should take advantage of.
However, there are qualifications that a homebuyer must meet in order to become eligible for this program, and it is important to stay informed on what these are.
Recordation and Real Property Taxes
If it turns out that you are a homebuyer that qualifies for the DC Tax Abatement program, it is important to understand what exactly you are exempt from.
First, you are exempt from a recordation tax at settlement. This means that while someone else who does not qualify for DC Tax Abatement would have to pay a tax to transfer the title of real property from one person to another, you wouldn’t have to. And 1.1% of the purchase price is credited to you from the seller.
Secondly, you don’t have to pay a real property tax for the first five years you live in your home.
This period of five years starts once the next full tax year has begun after filing.
Now that you know what the DC Tax Abatement program exempts you from, you need to know if you are eligible for it.
As for qualifications you must meet financially, there are income limits that you cannot breach and the property you are trying to purchase must cost a certain amount or less.
These amounts can change and fluctuate, however, as of 2018, if you want to be eligible for this program the purchasing price of your property must be $464,000 or less.
As for income limits, these can also change, but currently, if only one person is living on the property, then they must make $65,100 or less if they want to qualify for DC Tax Abatement.
Other qualifications to meet
Next, in order to determine your eligibility for DC Tax Abatement, you must look at a couple more factors that are not money related.
First, the property that you are purchasing must be your principal residence. Your principal residence can be determined by where you pay your taxes, where you vote, what address is on your driver’s license, etc.
In addition to the property being your principal residence, you must also be domiciled in DC. This means that you must have a DC government-issued ID, you are registered to vote in DC, and you file DC Personal Income taxes.
If all of these qualifications have been met, then you can begin to gather the documentation that your settlement agent will file.
Reporting changes in situation
One thing that is important to note is what to do if any of the information that granted you eligibility has changed after you qualified for DC Tax Abatement.
If your income has increased so that it exceeds the thresholds for the tax abatement program or if the property you purchased is no longer your principal property, then you must self-report these changes within 30 days after they happen.
This means that as a homeowner with DC Tax Abatement, it is your responsibility to stay up to date with the latest annual thresholds to qualify for DC Tax Abatement.
Applying for DC Tax Abatement after settlement
With so much going on in the homebuying process, it could be easy to let certain things, like DC Tax Abatement, slip.
However, if you did not apply for DC Tax Abatement before settlement, all is not lost. It is still possible to apply for DC Tax Abatement for up to three years after settlement.
Of course, all of the previously mentioned qualifications must still be met for you to be eligible.