June 19, 2019

SMART FAQ About the DC Tax Abatement Program

SMART FAQ About the DC Tax Abatement Program

DISCLOSURE: The facts provided in this article are for informational purposes only and are deemed accurate at the time it was published. For the most updated information, read the program details from the DC Office of Tax and Revenue.

Effective October 2018, the DC Office of Tax and Revenue (OTR) increased the purchase price and household income thresholds for the DC Tax Abatement Program, also known as the Lower Income Homeownership Exemption Program. Both of these threshold increases make it easier for applicants to qualify for financial relief when buying a DC home. Continue reading to better understand this assistance, who qualifies, and how Smart makes the process simple.

What is the DC Tax Abatement Program?

Tax abatement is a principal residence program with income qualifications. If you apply for and are granted a Lower Income Homeownership Exemption, the OTR will eliminate your real property taxes for the first five years that you occupy the residence (depending on when your application is approved).

You will also be exempted from recordation tax at settlement (1.1% of the sales price if under $400,000 or 1.45% of the sales price if over $400,000). In addition, you receive a credit from the seller in the amount the seller would otherwise pay for transfer tax (1.1% of the sales price if under $400,000 or 1.45% of the sales price if over $400,000).

Applicants must meet several qualifications to participate in the DC Tax Abatement Program, but the two biggest components are the home’s purchase price and the household income.

Purchase Price Thresholds

To qualify for the DC Tax Abatement Program, the purchase price of your DC property must not exceed $464,000.

Household Income Thresholds

The following table outlines the updated income thresholds for the DC Tax Abatement Program.

Persons in Your Household Household Income Limit
1 $80,100
2 $91,500
3 $102,960
4 $114,360
5 $123,540
6 $132,660
7 $141,840
8 $150,960

Economic Development Zones

There is also an alternate chart for properties in so-called “Economic Development Zones.” A homeowner can make more money than the threshold allows and still qualify if the residence is within one of these zones. Presently, the Economic Development Zones are only in the SE quadrant of Washington, DC Contact Smart to find out if a specific property is in one of the qualifying zones.

The income thresholds for these zones are as follows:

Persons in Your Household Household Income Limit
1 $117,098
2 $133,826
3 $150,554
4 $167,282
5 $177,737
6 $177,737
7 $177,737
8 $177,737

Other Qualifications

The owner(s) must occupy the property as a primary residence.

Let Smart Settlements pre-qualify you for the Tax Abatement Program and prepare the necessary paperwork!

Here is the application process and how Smart makes it easier for you:

Homeownership Exemption application ready for you at closing.

  1. You provide proof of annual household incomes for all adults in the home. Typically, this means supplying Smart Settlements with the last two tax returns, last two pay stubs, and last two W-2s. Other proof can include an employment letter, social security or public assistance statements, retirement allotments, or a record of unemployment compensation.
  2. If none of the eligible persons in the household are currently working, we help you create the required notarized affidavit that states the eligible persons are not working, provide information about their last employment situations, and explain why they are not working at this time.
  3. If eligible persons are self-employed, we help you provide a notarized Profit and Loss Statement that covers current income along with the previous year’s income tax returns.
  4. Approved applications submitted before the end of September will go into effect for the next calendar year. Applications received after September will go into effect in two years. The DC tax office will send a notice around the end of the year that advises homeowners of their tax-exempt statuses.  
  5. If eligible persons no longer qualify for the Tax Abatement Program during the applicable five years, it is their responsibility as the homeowners to notify OTR’s Special Programs in writing. A homeowner can be audited annually, and failure to accurately report a change in status can result in fines and penalties.

For additional information on this topic contact Evelyn Miller, Partner, at 202-753-7400.

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