Senior Citizen Deduction on Real Property

I just need to post something and people keep forgetting about this very generous deduction for senior citizens who own their homes. The DC government does take into account low income homeowners as well as low income senior citizens, but I’ll talk about low income in another post. This post is about old people. The thing is they need to apply, it is not automatic. You don’t get a deduction on you 65th birthday. DC government is not tracking you, it is not that organized.

So you’re old (65+) and you own your home but the property taxes keep going up and up, what are you to do? One, are you getting a homestead exemption? If not, why not? Are you not living in a residential property? If you live above your liquor store that you run, sorry no deduction for you. That’s a commercial property, probably. This is for a house, a townhome, a duplex, a triplex (and anything 5 units or less) or a condo. But most importantly this residential property must be your primary residence. The homestead deduction should take off $73,350 from the assessed value.

Okay so you have the homestead deduction. Great. Are you 65 or older? Here is what the Office of Tax and Revenue says,” When a property owner turns 65 years of age or older, or when he or she is disabled, he or she may file an application immediately for disabled or senior citizen property tax relief. This benefit reduces a qualified property owner’s property tax by 50 percent.” 50%!! Half off from regular priced taxes. Old timers whose house is worth over a million dollars will be taxed like their house is over HALF a million dollars. But what if it is a couple living in the house and one is 65 and the other is say 35? There are things I could say but they’re judgey and not polite. As long as the 65 year old owns 50% of the house or condo or whatever it’s still good.

But wait you say, “I’m 65 years old and on a low fixed income, half off does not cut it.” Well guess what, you can have your taxes deferred. I understand the 0% deferral, not so much the 6% deferral. I am familiar with ‘deferring’ things like student loans, it just means you don’t have to pay now, but it’s gonna get paid. With seniors I figure it just means those taxes have to get paid when grandma goes to the great beyond. Maybe that’s why this particular program needs your lender’s okay. Anyway, low income means a household Federal Adjusted Gross Income (AGI) of $50,000 or less. You get the 0% deferral if you are 75 years or older, have lived in your home 25+ years and make no more than $12,500 from dividends and interest. But you get nothing if you don’t fill out and send in the application (Word .doc file).

So if there is an old timer complaining that all these young white whippersnappers are moving in and raising their taxes, ask them if they have taken advantage of the real property programs for seniors and offer to help them fill out the application. Also remind them that nursing homes are friggin’ expensive and Medicare doesn’t cover everything, so having an ever increasing in value asset is a good thing…. provided their pot head daughter doesn’t blow all the proceeds from the sale of the house once she gets power of attorney…. Yes, apparently I’m still pissed off with my sister in law.

If you itemize think about paying your property taxes before Dec 30th

So I was planning to write about how great and walkable Shaw/Truxton Circle is, but I got an email from my ANC that is very time sensitive.

Long story short, in 2018 the tax rules change. There is a limit on local taxes, including local property and income. If you are paying more than $10K in property, income, and whatever passes as a local tax* (look at your 2016 DC tax return for the income part), you may want to pay your property tax early, so it can count with your 2017 taxes.

See the announcement below from The Office of Tax and Revenue https://otr.cfo.dc.gov/release/statement-prepayment-real-property-taxes

Statement on Prepayment of Real Property Taxes
Wednesday, December 20, 2017

The new Federal tax law limits the amount of state and local income and real property taxes that individuals may deduct from their Federal income tax, beginning in calendar year 2018.

Under the new law, the amount that may be deducted is limited to $10,000 of the combined local income and real property taxes.This applies ONLY to taxpayers who itemize their income tax filings.

District property owners may pay their 2018 real property taxes in 2017 to get the full benefit of that deduction in 2017.These payments MUST be received and recorded in calendar year 2017.The payments made will be credited to the calendar year 2018 real property tax obligation.

About 40 percent of District taxpayers itemize their income tax filings.Taxpayers who do not itemize will not receive a tax benefit by paying early.

The Property Tax payment can be made two ways:

  • The District of Columbia Office of Tax and Revenue’s (OTR) website www.taxpayerservicecenter.com provides the opportunity to pay by electronic check (e-check). Click on “Prepay your 2018 Real Property Tax Here” to get to the correct form. The payment MUST be made before midnight December 31, 2017. The information required to make the payment is the property address (or lot and square numbers), your bank routing number and bank account number.
  • Wells Fargo will accept payment by check or credit card at any DISTRICT branch office. Payment MUST be received by close of business on Saturday, December 30. You MUST bring a 2017 real property tax bill to the bank so that they can process the payment. Some Wells Fargo branches are not open on Saturdays.

Do not mail payments as they may not be recorded in 2017.

*So had a fun conversation with a relative who said they deducted some building fee assessed by their version of DCRA as a tax, that and permits. So…. anything the local government charges you that relates to your house….That was a bit more creative thinking than I was willing to do for myself.

Death, Taxes and the 60% Senior Citizen Property Tax Discount

I’ve complained about my dead aunt paying property tax before. I’ve even reported it to the DC Office of Tax and Revenue in 2016 and nothing, so I’m going to treat it like a very open secret, and assume DC government doesn’t give a rat’s rear end.

My great Aunt Geraldine died in February of 2012, she was over 100 years old. Prior to her death she was in a nursing home somewhere in Maryland. Her estate, which is a side of family I’m not familiar with, has been paying the property taxes. That’s fine except, they’ve been paying at the hugely reduced Senior Homestead Deduction.

Forgive me, math is not my strength, but without any deduction she’d be paying $2368.09 annually. Her estate and not my dead aunt, because being dead she’s not doing much these days, has been paying $685.82 annually. Roughly that’s a 60% discount.

The Senior Citizen Homestead Deduction is one hell of a discount. So when you encounter someone who 65 years old or older and or disabled who is a homeowner complaining about property taxes being too high, ask if they are receiving the deduction. Of course they could be receiving the deduction and still complain, as old people are wont to do. You could also look their house up on the DC Property Tax Database to check if they are receiving the deduction.

It is such a great deduction that estates, like my Aunt Geraldine’s estate, has no incentive to transfer the property into the names of younger hands. It is also a problem for vacant properties where the owner is dead.