How to qualify for the DC Tax Abatement program

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. This page was updated 08 January 2016.

Income restrictions

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

  • (a) The purchase price for the property must be $408,000 or less
  • (b) The income threshold – max gross income – must be:
  • Persons in household
    Household income limits
    1.
    $57,120
    2.
    $65,280
    3.
    $73,440
    4.
    $81,600
    5.
    $88,140
    6.
    $94,680
    7.
    $101,220
    8.
    $107,760
  • (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.

Discussion on DC Tax Abatement. Click on a gray box to expand.

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.

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. That amounts to a 2.2% swing at settlement in favor of the qualified homebuyer!

Do I have to be a DC resident to qualify?

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

What does “domiciled” in the District of Columbia 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 get 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 despite it being non-taxable income?  Do I need to change my state of legal residence?

Yes and yes.

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 DD2058 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.

I didn’t know about DC Tax Abatement and I have already settled. What can I do?

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.

Updated 08 January 2016 | Information deemed reliable but not guaranteed.

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Comments (4)

  • Dan Soderberg

    Dan Soderberg

    22 September 2014 at 11:24 | #

    Catherine,

    My daughter purchased a condo in DC in 2010 and is taking advantage of the tax abatement program. The question we have is two fold.

    First, she is about to get an increase in salary that will take her over the single person limit. Does this mean she no longer qualifies for the tax abatement.

    The second question relates to her boyfriend who recently moved in with her. Does his income have anything to do with this? They will file separate tax returns and he is paying rent to live there.

    Thanks. Dan

    reply

    • webmaster

      webmaster

      22 September 2014 at 12:20 | #

      Hi Dan,

      I checked in with Catherine, who had the following to say:

      The DC tax abatement guidelines do not presently require homeowners with tax abatement benefits to report any change in income status or additional household members.

      If homeowners choose to retain ownership of the property, but are no longer using the property as their principal residence; homeowners are required to provide a notice of cancellation to the District upon change of residence.

      At one point in time, DC Recorder of Deeds had mentioned the Office of Tax and Revenue was hoping to require post-closing reporting when there was a change in income level. We will check in with the Recorder of Deeds to see if there is anything in the pipeline.

      Hope this is helpful!

      reply

  • GNO

    GNO

    12 April 2016 at 17:34 | #

    Any update on this?

    reply

  • Guest

    Guest

    01 July 2016 at 15:37 | #

    Hi,

    I qualified for this program when I purchased my home, and I was told that my abatement would remain in place even if I received a pay increase. That's been true for the last four years, meaning I should not have to pay taxes for one more year. However, I received a letter today stating I owe taxes, and that I no longer qualify for the program. Have you learned more about the income requirements?

    reply

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