Have you ever sat down to file your income taxes and discovered a tax deduction or credit you qualify for ‘ one you hadn’t noticed before? It’s a great feeling, right?
But what if you spot a tax benefit that seems to match your circumstances, only to find out you don’t qualify? That not-so-great feeling is what many DC residents experience when they hear about the “Schedule H Homeowner and Renter Tax Credit.” It’s a tax benefit intended to help lower- income residents facing high property tax bills, but the rules are so restrictive and complex that very few DC households actually get it.
Fortunately, that could soon change thanks to legislation introduced this month by Councilmember Jack Evans, along with Michael Brown and Phil Mendelson. The bill would transform and modernize Schedule H, making thousands of DC households eligible for new or expanded tax credits to help offset the impact of property taxes.
Because the property tax is tied to what someone’s home is worth and not what they earn, there are times when property taxes can be hard for residents to pay. Think about a retiree living on social security whose home is in the middle of a gentrifying neighborhood, or a homeowner who lost his job and is having trouble paying bills.
Property taxes can affect renters, too, since landlords pass on their expenses to tenants through the rents they charge. Given DC’s incredibly high and rising rents, the impact of passed-on property taxes can add to the challenges low-income residents face paying rent each month.
Schedule H offers a tax credit of up to $750 to homeowners or renters when property taxes are high relative to income. (Under Schedule H rules, 15 percent of rent is considered a property tax equivalent.) But several restrictions make this credit hard to get. For one, no one above $20,000 is eligible, an income limit that was set 35 years ago ‘ before Marion Barry’s first mayoral term. Then there’s the requirement that two people sharing housing must combine their income when applying. A young parent who moves in with her mother to save on expenses cannot get Schedule H if she and her mother earn as little as $10,000 each.
The legislation would address these and other problems. It would raise the income eligibility level to $50,000 and adjust for inflation annually after that, and it would allow adults living together to apply for Schedule H based just on their income and their share of rent or property taxes. It would increase the maximum credit (which also has not been adjusted since the 1970s), to $1,000.
The price tag for these changes is significant. But as the District climbs out of the recession ‘ and as gentrification and rising rents continue ‘ taking steps to help residents struggling with property tax bills should be a priority.
P.S. “Are you kidding me??” That’s the response we got on Monday from a staffer in the CFO’s budget office to our statement that this would be a “quiet week” at the John A. Wilson Building. He is knee-deep in trying to assemble Mayor Gray’s proposed budget and is having anything but a quiet week (though we’re glad he still takes time to read our blog). We should have added that it would be calm “to the naked eye” while folks in the Mayor’s budget office and the CFO are putting in long hours to pull together the fiscal year 2012 budget.
