New District homebuyers can tap unique set of tax breaks

Business,Patrick Crowley

Federal tax credits for first-time homebuyers have expired, but incentives unique to D.C. may still be available.

For about a decade, a $5,000 tax credit has been available to buyers in the District who have not owned a home in the jurisdiction for the previous three years. Realtors say the program had been popular in the past, but the number of people using it had dropped off as they tapped the $8,000 federal credit instead.

“D.C. homebuyers were ineligible to claim both the $8,000 and $5,000 credits,” said Charles Sullivan of Keller Williams Realty in Washington. As a result, there is now “little awareness among buyers of the ‘old’ $5,000 tax credit,” he said.

There also is another catch: The program must be authorized each year by Congress. And so far this year, the incentive has not been enacted into law.

But Joe Himali, principal broker with Best Address Real Estate in Georgetown, is confident Congress will approve the incentive for another year.

“Virtually every year it is one of the last bills passed for the year,” Himali said. “It really doesn’t matter when Congress passes it, as long as it’s done in this calendar year. That’s because it will be retroactive for the entire year and can be claimed when a homeowner files their 2010 federal tax return.” 

Roy Kaufmann, a real estate attorney with Jackson & Campbell in Washington, said he too is optimistic Congress will pass the $5,000 tax credit for 2010. Del. Eleanor Holmes Norton, a Democrat who represents Washington, is the bill’s sponsor.

Kaufmann said another District homebuyer tax credit that often is overlooked is “far more generous than neighboring jurisdictions’.” The Lower Income Home Ownership Tax Abatement, available to people who have not previously owned a house in the District, has three benefits: 

» The purchaser pays no recordation tax, also known as a transfer tax.
» At closing, the seller provides the buyer the amount of money equal to the transfer tax.
» Real estate taxes are waived for five years.

To be eligible buyers must live in the house, and the property must have a purchase price of $319,920 or less. The household income must also not exceed $54,120 for one person, $61,860 for two people, $69,600 for three people and $77,280 for four people.

“While the program is generous, the paperwork requirements are stringent,” Kaufmann warned. “If the application does not accompany the deed, there will be no waiver of the transfer/recordination taxes.”

Also, if the property is rented out by the owner, the property tax abatement ends.


On the Web

Information about the tax credits available for District homebuyers can be found on the District’s government Web site:

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