Del. Norton working to re-instate tax credit that has existed since 1997
First-time homeowners in the District of Columbia, who purchased their principal residence after Dec. 31, 2011, will not be able to take advantage of the popular $5,000 DC Homebuyer Tax Credit when they file taxes this year.
The tax credit that has made homebuying affordable for thousands of DC residents since it was first introduced nearly 15 years ago was axed from legislation during negotiations over the fiscal cliff and was not included in the American Taxpayer Relief Act signed by President Barack Obama last week, according to a spokesman for Del. Eleanor Holmes Norton (D-DC).
An attempt to make the credit retroactive for 2012 purchases and extend it into 2013 was unsuccessful, but the congresswoman is working on a plan to get the credit reinstated, he said. There's no specific plan of action or timeline in place yet.
"Due to high demand for housing and low interest rates, the DC real estate market will remain healthy – with or without the tax credit," said Federal Title founder & president Todd Ewing. "I’m really not surprised by the news given the current economy and that DC has one of the strongest housing markets in the nation."
Approximately 10% of Federal Title's DC real estate closings last year involved a first-time homebuyer who took advantage of the credit, Ewing said.
In previous years a homebuyer making less than $70,000 annually who had not owned a principal residence in the District for a one-year period ending on the date of purchase was eligible to claim the full credit. The credit phased out for individuals making between $70,000 and $90,000 (or $110,000 to $130,000 for joint filers).
The popular $5,000 DC Homebuyer Tax Credit was initially part of the Taxpayer Relief Act of 1997 and has been renewed – sometimes on a retroactive basis – for every tax year since. It was most recently renewed two years ago through the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. The credit was retroactive for 2010 and extended through 2011 at that time.
The credit also served as the model for the $8,000 First-time Homebuyer Credit offered to first-time homebuyers by the federal government for properties purchased in 2008, 2009 and 2010.
Despite the uncertain future of the $5,000 DC Homebuyer Tax Credit, residents in the District of Columbia still have a number of local homebuyer programs at their disposal, including the DC Tax Abatement Program. Unlike the DC Homebuyer Tax Credit, there's no first-time buyer requirement to take advantage of DC Tax Abatement, only income and purchase price restrictions, Ewing said.
"The DC Tax Abatement program is still available," Ewing said. "Income qualifications are not that far apart, but through tax abatement you get the benefit of a 1.1% credit toward closing costs plus you don’t have to pay real estate taxes for the next five years after closing."
The homeownership rate in the District of Columbia was 42.8% in 2010 compared to just 28% in 2000, according to U.S. Census Bureau statistics, while median home values in DC increased from $157,200 to $442,600 over the same period of time. The census statistics show DC's median household income rose from $40,127 in 2000 to $61,835 in 2010.