DC Tax Abatement

Comprehensive guide to the popular DC homebuyer program

How to qualify

The DC Tax Abatement Program was designed by the District of Columbia to help lower income residents purchase property.

Homebuyers who qualify for DC Tax Abatement are exempt from paying DC Recordation Tax at settlement. They also receive an allowable credit from their seller(s) that’s equal to the DC Transfer Tax.

What’s more, DC Tax Abatement recipients are exempt from paying their property taxes for the first 5 years they live in the home, beginning the next full tax year. What a great deal!

Qualifying properties must not exceed a certain purchase price threshold, while incomes of DC Tax Abatement applicants must not exceed a certain household limit. Contact us if you need assistance with DC Tax Abatement. We’re more than happy to help you file your qualified application as part of the settlement process.

Purchase price and income restrictions change from time to time, but we do our best to keep our information on DC Tax Abatement up to date.

Information deemed accurate but not guaranteed. Last update 05 October 2020.

Income Restriction

The income limits to qualify for DC Tax Abatement are as follows:

  • (a) The purchase price for the property must be $484,000 or less
  • (b) The income threshold – max gross income – must be:
  • Persons in household
    Household income limits
    1.
    $66,900
    2.
    $76,440
    3.
    $85,980
    4.
    $95,520
    5.
    $103,200
    6.
    $110,820
    7.
    $118,500
    8.
    $126,120
  • (c) The property must be a principal residence; and
  • (d) The purchaser must be domiciled in the District of Columbia.

Required Documentation

Be sure your DC Tax Abatement application packet contains the following:

  • (a) The DC Tax Abatement application (FP-420)
  • (b) Copy of the Closing Disclosure
  • (c) Copy of the sales contract
  • (d) Previous year’s W-2s
  • (e) Proof of annual household income:
    Examples include but are not limited to: current pay stubs, employment letters, Social Security statements, public assistance statements, retirement allotment and unemployment compensation.)
  • (f) If all eligible working person(s) in the household are not working, state in a notarized affidavit that the eligible person(s) is not working, the last employment that person(s) held and why that person(s) is not working now.
  • (g) For self-employed person(s) you must provide a notarized Profit and Loss Statement, under penalty of perjury, for current income and previous year’s income tax returns.

NOTE: 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.

DC Tax Abatement Application Form

Download a copy
Information deemed accurate but not guaranteed. Last update 05 October 2020.

FAQs

What is the DC Tax Abatement program exactly?

Assuming you qualify, you are exempt from paying recordation taxes at settlement. You’re also exempt from paying real property taxes for the first five years you live in your home, beginning the next full tax year after filing.

For properties under $400,000, you are exempt from the 1.1% (of the purchase price) recordation tax and customarily receive a credit for the seller’s 1.1% (of the purchase price) transfer tax at settlement. That amounts to a 2.2% swing at settlement in favor of the qualified homebuyer!

For properties $400,000 and above, you are exempt from the 1.45% (of the purchase price) recordation tax and customarily receive a credit for the seller’s 1.45% (of the purchase price) transfer tax at settlement. That amounts to a 2.9% swing

Do I have to be a DC resident to quality?

You must be domiciled in the District of Columbia to qualify for DC Tax Abatement.

What does “domiciled” mean?

To be domiciled in the District of Columbia you must:

  • (a) Obtain 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
NOTE: THE PURCHASER CAN OBTAIN/DO THE ABOVE MENTIONED AFTER THE PURCHASE.
Do I have to live in the property?

Yes

The property must be used as your primary residence if you wish to qualify for the DC Tax Abatement program.

Who files the documents so I can receive tax abatement?

Your settlement agent, such as the team at Federal Title, will file the required documents with the deed after closing.

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.

Does my military housing allowance count as income?

Yes. Even though military housing allowance

The DC Recorder of Deeds looks at all sources of income, not just taxable income. And you need to be domiciled in the District of Columbia which includes filing DC income taxes. You can fill out and file a form to change your residency to the District of Columbia.

If my partner / spouse is not on title, will his / her income affect my eligibility?

It’s very likely.

Income of all household members over the age of 18 is used to determine eligibility for DC Tax Abatement, even if a household member that is living at the property is not on the title of the property. Another common example involves adult children still living at home.

On the other hand, the household income limit increases with the size of the household, so there’s a chance you may still qualify. Review the chart above under “Income restrictions” and read “Household income a factor on DC Tax Abatement application” for more information.

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 2015 and the tax period for 2015 is October 1, 2014 through September 30, 2015, you will not be given the exemption until the 2016 tax period. You will be required to pay real property taxes for April through September 2015. Your real property tax exemption will start 2016 and finish 2021.

Can I apply for DC Tax Abatement after settlement?

You can apply for DC Tax Abatement after the fact up the three years from the date of settlement, according to the Recorder of Deeds office.

Have questions? We’d love to hear from you! Contact Us

Closing Costs Explained…

Closing costs include taxes, lender fees and title fees that a homebuyer pays at settlement. Watch this video to prepare for the process.

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