Good Deal for DC Homeowners: Property Taxes Are Lowest in the Region

By Katie Kerstetter

The District of Columbia has adopted numerous provisions to decrease homeowners’ property taxes in recent years, in response to rising assessments.  The Homestead Deduction has been increased from $30,000 to $64,000 [1]; a 10 percent cap on annual increases in taxable assessments was set; and the property tax rate has been cut, from 96 cents per $100 of assessed value to 88 cents.  Finally, the DC Council adopted a “calculated rate” provision that would decrease the rate if certain revenue targets are met.  This trigger reduced the residential property tax rate in both 2007 and 2008 and is likely to reduce it in 2009 as well.

As a result of these measures, DC homeowners now enjoy the lowest property taxes in the region, and most homeowners have seen their tax bills fall ‘  or grow only modestly ‘  over the past three years.

  • In 2007, DC homeowners paid lower property taxes than homeowners in Montgomery, Prince George’s, Arlington, and Fairfax counties.  Among homes with an average sales price of $500,000, for example, DC homeowners paid an average tax of $2,170, compared to $3,109 in Montgomery County, $3,690 in PG County, and over $4,200 in Arlington County and Fairfax County.  (2007 is the most recent year for which comparable data are available.)
  • Half of all DC homeowners are paying less in property taxes in 2008 than they did in 2005.  Another 36 percent of DC homeowners have seen their tax bills grow less than five percent per year since 2005.
  • DC’s homeowner property tax rate is now lower than in Montgomery, Prince George’s and Fairfax counties.  Only Arlington County, with a property tax rate of $0.818 per $100 of assessed value, is lower than the District’s rate of $0.85 per $100 of assessed value.  DC’s property taxes are lower than in Arlington, however, because Arlington does not have a Homestead Deduction or annual tax cap.
  • Taxable assessments are well below full assessments for many homeowners, and the gap is growing.  In 2008, the typical homeowner’s taxable assessment ‘ the assessment to which the tax is levied ‘ is just 51 percent of the full assessed value of the home.

Although DC’s homeowner property taxes are low, the calculated rate could lead to further cuts in the homeowner property tax rate in future years.  This provision ‘ which led to tax cuts in both 2007 and 2008 ‘ is not expected to trigger a tax  cut in 2009 but could led to cuts after that.  Yet the results of this analysis indicate that further tax cuts for all homeowners should not be a top priority.   This is especially true considering the recent economic slowdown, which is likely to reduce DC’s tax collections over the next few years.  For these reasons, the District should consider eliminating the calculated rate provision ‘ or at least suspending it temporarily.

If further tax relief is pursued, the District should target these efforts on low-income renters ‘  who face substantial rent burdens but have not benefited from property tax cuts ‘  and  low-income homeowners, since they are most likely to be burdened by property taxes.  This could be done by expanding the District’s Homeowner and Renter Property Tax Credit, also known as Schedule H, which provides assistance to households whose property tax bills are high relative to their income.  The income eligibility level and maximum benefit under this credit have not been changed in nearly 30 years, and complex eligibility rules result in a participation rate of just 19 percent.

This report explores trends in property taxes for DC homeowners, including detailed data on property tax trends at the neighborhood level.

Click here for the PDF of the full report (13pp.)

End Notes:

[1] The Homestead Deduction lowers the amount of the home’s assessment that is used to calculate a home’s real property tax.