An Unlikely Beneficiary: Property Tax Credits and Low Income Renters

When you think about property taxes, you probably don’t think about renters, but you should.  Renters pay property taxes, too, even though they don’t get a tax bill directly. Instead, landlords get the bill, but the rents they charge need to cover all of their expenses, including property taxes.  This means that a portion of every rent tenant’s payment indirectly is a property tax payment.

And that’s why it is important for property tax relief measures to include renters as well as homeowners. The good news is that DC’s low-income property tax credit, known as Schedule H, offers help to both renters and homeowners. And legislation adopted late last year to improve Schedule H, if funded this year, would allow thousands of homeowners and renters to get help with high housing bills.

But how will this work? How can renters claim a credit for taxes they pay indirectly? The answer is pretty straightforward.  DC’s Schedule H, like property tax credits in many states that also cover renters, assumes that a portion of a resident’s rent payment goes to cover their landlord’s property taxes. For Schedule H, the property tax equivalent now stands at 15 percent of rent but would rise to 20 percent under the reforms passed in the last council session.

Schedule H provides assistance when property taxes or the rent equivalent are high compared to a family’s income. The new Schedule H reforms could do a lot to help renters pay their bills.  For example, a family earning $40,000 and paying $1,100 a month in rent ‘ the average for a one bedroom in DC ‘ would be considered as having paid $220 a month and $2,640 for the year in property taxes.  Based on the Schedule H formula, they would be able to claim a tax credit of $1,000, defraying almost half of their property tax equivalent.

That could make a big difference for low and moderate income DC residents!

As housing costs rise in DC, and the waiting list for subsidized housing remains huge, it becomes more and more important that DC take the needs of renters into consideration. Sixty-three percent of renters earning under 30 percent of the District’s Area Median Income (or less than about $32,000 for a family of four) are spending at least half of their incomes on housing. And the number of renters paying at least half of their incomes on housing is increasing across all income groups.