For a major metropolitan center, the nation’s capital of Washington, DC has surprisingly low tax rates. It’s currently fighting a misleading reputation as a high-tax area, based on numbers from more than 20 years ago. In fact, DC recently made headlines when it enacted tax breaks for many residents. One reason for the misconception is that the DC area’s overall property tax burden is high, which differs from tax rate by factoring in median home prices. The DC metro and Northern Virginia area do have some of the highest home prices in the Mid-Atlantic States, but that is balanced for the most part by some of the highest median household incomes in the nation.
How Much is Washington Property Tax?
Washington divides real estate taxes into four classes. Most Washington residents are a Class 1 designation, which means they pay $0.85 per $100 of assessed value in real estate tax. At a median list price of $650,000, a single-family home in DC costs a median $5,525 in taxes annually. Class 2 pertains to business property. Vacant properties are labeled as Class 3 and taxed at $5.00 per $100, while “blighted” property, or structures deemed uninhabitable, dilapidated, or unsafe, falls under Class 4 and is taxed at $10.00 per $100. Vacant properties may qualify for exemptions and be taxed at the $0.85 tax rate if they meet certain conditions, according to the Department of Consumer and Regulatory Affairs.
What About Other Taxes?
Often, when a city has a fairly low property tax rate, other taxes are much higher to compensate. However, there is no personal property tax on vehicles in Washington, DC. In addition, personal income tax is only moderately higher than the national average. It’s divided into four brackets: four percent on the first $10,000; six percent on up to $40,000; 8.5 percent on up to $350,000; and 8.95 percent on incomes exceeding $350,001. General sales tax is 5.75 percent, while specific goods and services are taxed at higher rates. There are additional taxes on luxury goods, though this is common practice throughout Virginia: alcohol, restaurant meals, and rental cars are taxed at 10 percent, lodging at 14.5 percent, and commercial parking at 18 percent.
How Does Washington Property Tax Compare with Virginia?
Virginia’s average tax rate among localities works out to about $0.74 per $100. However, residents who do not live in one of Virginia’s 38 independent cities generally have to pay both town and county taxes, making their overall tax burden higher. Washington’s tax rate is lower than in most of Virginia’s large cities. For example, the state capital of Richmond’s rate is $1.20 per $100. Virginia Beach, the state’s most populous city, has a rate of $0.99 per $100. The only sizeable Virginia city with a tax rate lower than Washington’s is Charlottesville at about $0.72 per $100.
How Does Washington Property Tax Compare Nationally?
The national average real estate tax rate is around $1.00 per $100, so Washington’s rate of $0.85 is quite low comparatively. Among the nation’s five largest cities, only New York City’s overall effective tax rate of $0.72 is lower. Most other major cities have a real estate tax rate of more than $1.00 per $100, while many rural locations are well below this figure. New England states have the highest average urban tax rate at about $2.10 per $100, with Bridgeport, Connecticut taking the unenviable title of highest property tax in the nation. Among rural locations, residents of the Mid-Atlantic states pay the highest property taxes.
Are There Tax Relief or Incentive Programs?
DC offers a homestead deduction which subtracts $71,700 from your home’s assessed value before computing real estate tax. In the median home price example, the taxable amount of the home would be reduced to $578,300, resulting in a tax of about $4,915. This would save the homeowner $610 annually. To qualify, homeowners must file an application with the Office of Tax and Revenue.
Senior citizens age 65 and older, as well as disabled persons, may qualify for a 50 percent property tax reduction. The income limit to qualify for this relief is $125,600. DC also offers a tax deferral program for these populations. Applications for both programs are available through the OTR.
DC offers other tax credits and relief programs. The Assessment Cap Credit is a balance to the recent surge in home values in the area by taxing no more than 10 percent of a year-over-year market value increase. There is also a First-Time Homebuyer Income Tax Credit of $5,000 for qualifying homeowners. There are several other programs available to DC homeowners detailed on the District’s OTR page.
How and When Do I Pay Taxes?
Annual real estate tax amounts are split into two payments. Due dates are March 31st and September 15th. You can mail your payment to the Office of Tax and Revenue, pay in person at a Wells Fargo bank in DC, or pay online through DC’s e-check system. The penalty for late payments is 10 percent of the tax amount plus 1.5 percent interest per month. Failure to pay taxes may result in your property being sold at a tax sale.
2 Point Highlight
The national average real estate tax rate is around $1.00 per $100, so Washington’s rate of $0.85 is quite low comparatively.
DC offers a homestead deduction which subtracts $71,700 from your home’s assessed value before computing real estate tax.
