Taxes

Thought Exercise: Moving out of Shaw

I had a job interview a few weeks ago, it went well, so well I seriously gave thought to what we would do if I was chosen for the position. You see, it is in the same suburban area of Maryland where my spouse, the Help works, and I said if I were to get a job there, we’d move. So for several days I was looking at moving to Maryland and all that would entail.

We already know what neighborhoods we want to live in on the other side of the border. Yes, this is something we think and talk about on a regular basis. But I hadn’t thought about the consequences of leaving Shaw and the city.

What we’d lose
Walkability
Our part of Shaw is a wonderfully compact. Within a 1/3 mile I can walk to the grocery store, a couple of bakeries, a bunch of restaurants and bars, the metro, and Destructo’s daycare. I haven’t owned a car for over twenty years and it’s been a couple of years since I’ve driven. I like being able to walk with Destructo or plop him in a stroller and walk to a park. When I looked at a few houses on-line that I thought was close enough to a metro station, PG Plaza was over a mile away, and a park well over 1/3 mile. Whereas our block has a WalkScore in the 90s the areas I was looking at had scores in the 30s… and no sidewalks.

Lower Property Taxes
When looking at possible homes in our price range, looking at the property taxes made some places just, unaffordable. A lovely little 3 bedroom in the $300-400K range had taxes above $5,000 a year. Our taxes in DC are somewhere just below $3K a year. A couple hundred dollars of our monthly mortgage goes to taxes and insurance, but I was seeing sizable $400-$700 a month going to taxes for PG Co. properties.

Free Pre-K
Dangit, I been paying into this system, I’m going to get my 2 free years. Destructo won’t enter the school system until 2020-21. If we were to move, we’d be paying for 2 more years of daycare since PG County doesn’t have free Pre-3-4K. That’s when I decided I’d rather have a bad commute (I’d worked at this location before) than pay $30,000+ for 2 years of daycare.

Loss of connections
Living here for nearly 20 years, despite people constantly moving, we’ve got some deep strong connections here. After observing others move to other nearby neighborhoods or over into suburbs, I know after a while you stop seeing those people. I wouldn’t expect us to be any different. We have friends and family in PG County and those connections would get stronger, but I would miss what I have built here in Shaw.

Other things I had to consider
Sell/Rent house?
Then there is the question of selling or renting. I’m emotionally attached to this house I live in. It was my first property. I’m not sure I can just hand it over to some renter to make their mark on. However, renting would allow me to return to the TC if I manage to return to my current duty station if an opportunity arose. Also the rules about renting in this city seem to get more complicated, which would mean hiring a property manager. Some of my former neighbors self manage, other use a property manager. Question would be would I want to self manage my baby?

Then we’d have to make the house suitable for renters. When you own your own home, there are things you let slide. Our AC died 3 years ago. We’ve got portable and window units that work well. The bathrooms aren’t painted that well, because I painted the whole house myself and never ever got back to them. There is a whole long list of little repairs that should be done, but since the health of the house does not depend on those repairs getting done anytime this century, they don’t.

If I were to sell, the property tax issue I have such a problem with would be less of an issue, because the equity we have in our home would make some places mortgage free. I wouldn’t have to think about managing a DC property.

Mari InShaw to Mari N. Peagee?
A lot of my on-line identity is based on being in Shaw/Truxton Circle. Would I change it if I moved? I’m still pondering that one.

Recently, I found out I wasn’t chosen. I called one of the interviewers, who I knew professionally, regarding why I wasn’t and now I know what areas I need to improve. So when the next opportunity pops up I know what I will do, and if chosen, I have a plan.

Edited 12/11/19 to add Walkscore URL.

Some DC Homeowner Tax Hacks

Yes, I know it is a click-baity title but bear with me, I got some good stuff.

1- Get your property taxes deferred. Single? Do you make less than $50K a year? Then you may be able to get a deferment. Unfortunately this doesn’t look like the same deferment I had. Those were 5 wonderful years of not paying any property tax, then one year, I made about $500 too much, and that was the end of that. It looks like you fill out the second (1st half is for old people) part of form FP-110.

2- Are you 65 years or older OR do you receive SSDI? Pay less on your property taxes than those suckers with just a Homestead Deduction. Go to the forms page, fill out FP-100.

3- Did you for some odd reason not take the $5000 if you bought during or before 2011, the 1st time homeowner tax credit? Really? That was just free money. Since there can’t be too many people that qualify for this, I’m going to move on.

4- Do you make $20K or less? You don’t have to be a homeowner for this, renters can qualify. On your DC state income tax, fill out Schedule H, you’ll get a credit.

Should Your Property Taxes Go Up 50%+ a Year? Because, Racism

Once upon a time in DC parts of the city experienced gentrification. Homeowners who had lived in the city through the crack years, the control board, or got in before the house prices went to crazy town began to experience unpleasant surprises year after year. Say their home that they may have bought for $75K was being assessed at $100K one year, then about $300K the next when the owners did not do any improvements to their home. I remember neighbors who bought their home for something around $200K , later got an assessment of $500K. Of course, people freaked the hell out, because their property taxes kept jumping up and up, near 50%. Some going from several hundred one year to several thousand dollars a few years later. If you’re a lower or low middle income homeowner, this is a very good reason to freak the hell out.

A tool to stop the freaking out and accusations that the city was trying to push out long time homeowners with high property taxes was the 10% cap. A DC homeowner’s taxes cannot go higher than 10% each year, regardless of how much the city thinks their house is worth.

So the DC Policy Center is saying the 10% cap is wrong and possibly racist. It seems to defy logic. They attacked the homestead deduction and failed to show how these things directly related to racism.

There also is some misleading language. In DC there is a homestead deduction, in some other places such a thing is called a homestead exemption, usually it’s a discount off the full tax bill for resident homeowners. Exemption does not mean no taxes are paid, the report seems to hint that it is in not being clear. Another word, “elude” or “eludes”, which according the the dictionary means, “evade or escape from (a danger, enemy, or pursuer), typically in a skillful or cunning way; (of an idea or fact) fail to be grasped or remembered by (someone); (of an achievement, or something desired or pursued) fail to be attained by (someone).”. The claim, “Home ownership and the wealth associated with it eludes communities of color, ” irritated me. I totally acknowledge home ownership is challenging, but DC is frickin’ filled with opportunities for those who are first time home owners that other places don’t have, so much that it is worth another post to go through them.

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.

Death and Taxes – In Shaw – Mari in the Citi

Back in 2013 I wrote about my dead Aunt G. who despite being very dead was still getting the Senior Citizen Homestead Deduction. I chose not to out my dead aunt because I wanted to give whomever I was related to enough time to probate the will and get auntie’s estate all straightened out. I figured I’d wait 5 years after her death for her estate to clear everything up, but due to a few things that have happened I’m gonna have to air this out earlier than planned.
I’d been keeping the voice mail where one of my relatives informed me of Aunt Geraldine’s death back in January of 2012. Well apparently voice mails have a shelf life and somehow it did not get saved in a backup. It was my reminder when looking at my list of voicemails to every so often to check and see if she was listed as the owner of her house in SE.
And recently I was speaking with another relative about the situation. I mentioned that the property was still in Aunt Geraldine’s name and the relative mentioned that her will was probated sometime ago.
I’ve held off long enough.
Uncle Randolph (pictured sitting on the right) has been dead since the late 80s
and after his death, her health went south. Her last years were spent in a nursing home somewhere in Maryland. She hadn’t lived in the house since the mid to late 2000s.
Before her death, she paid $570, and $635 in property taxes in 2010 and 2011. She died January 13, 2012, that year she paid $925 in property taxes, but they went down in 2013 to $799, $786 in 2014, and $865 in 2015. This year it appears her tax bill is $626. The house is valued by the city to be worth $220,810 (2016 assessment), but despite being very dead she (or whomever is running her estate) is getting the benefit of her (and my late uncle’s) tenure in the house, with the 10% cap on how high taxes can go up and double bonus points of the Senior Citizen Homestead Deduction.
It is great that DC has the deduction for seniors. However, the city does a poor job of checking up on seniors to see if they are still alive and kicking. I can’t judge them too harshly with Aunt Geraldine because she still does not appear in the Social Security Death Index. However, she’s not the only dead person in DC paying real property taxes with the Senior Citizen Homestead Deduction.
Mrs. Geraldine Lewis is very dead, laid to rest in a Maryland grave and should be free of the burden of taxes.

Have you paid your property taxes?

This morning I found in today’s Washington Post the big list of District properties that have failed to pay their property taxes. Check the list here (PDF) to make sure your mortgage company actually paid your taxes. One year I noticed a neighbor’s property was listed, mentioned it to him and it seemed to be a snafu on his mortgage company’s part.

Now let me head off the usual questions I get regarding the tax sale with telling you what little I know based on my own limited experience and 2nd hand experiences of others who did more follow through.

1. You just can’t go to a tax sale and buy a house. All you are buying is the tax lien that gives you the right to foreclose.

2. There is a time limit of when you can and cannot foreclose. The owner has so much time of when they can pay the lien and you’d have to foreclose by a certain time. The details of this I’m fuzzy on.

3. If you foreclose it does not give you a free and clear title. If there is a $300K loan on the property, the bank still has a claim, then there is everyone else with a lein on the property, and any others that would challenge the new ownership. You are responsible for the title search.

4. If you’re only interested in the interest, as most property owners pay the tax bill, with interest, keep in mind that the amounts listed are the starting points. You will only earn interest, which last I heard was a sweeet 18%, on the amount listed. If you bid, and most likely you will, over the amount, that extra earns no interest. So get out your spreadsheets factor in actual interest earned, minus $150 Tax Sale Fee the District charges you, and decide before you go what amount you’ll stop at.

5. The tax sale is filled with idiots who think they’re bidding on a house. They will jack up the bids and make the interest you’d earn pointless. But considering I’m only earning 1% at my bank on a good day, it takes a lot to reach pointless.

6. Before you bid you need at least 20% deposited with the DC Treasurer’s Office. Failure to have that will nullify your bid.

Since every single cent I have is going to the weddings, and after that some overdelayed home fixin’, I won’t be participating in the tax sale. If I were, I’d aim for unimproved land and parking spots in condos in neighborhoods where parking doesn’t exist.

Death, taxes and a building that’s gonna fall

Decay
Originally uploaded by In Shaw

This is the alley side of 1607 New Jersey Avenue, NW. I’ve been told by one citizen living on this block that he’s fearful when walking by this building because it looks like it is going to topple over at any moment. It’s got missing bricks at the base on the alley. It bows out. Its got some pretty wicked looking cracks and I think that upper window is broken.
Well I took a look on the property tax database and 1607 is owned by Arvid W Broadus who is receiving the Senior Citizen Homestead Deduction. Mr. Broadus is dead. According to the Social Security Death Index he died last year 16 Jan 2009 (born 30 Sep 1919) and unfortunately he didn’t make it to his 90 birthday. Unfortunately for us, and anyone walking by this structure, it hasn’t turned over to the living.

ADDITION- Apparently people still read this blog, even journalists. It appears Channel 7 did a story on this house.

Let’s get personal at first, then we’ll get real.
In my general tradition I have finished my personal federal and DC taxes in the last week of February. I sort of did my federal taxes during the blizzard of 2010, but as always, there are forms and papers that trickle in the mail reminding me of donations and income I’ve completely forgotten about. But once you’ve done your federal taxes you can file your DC individual taxes on-line, for free. To do so you will need your federal Adjusted Gross Income (AGI) you entered on your 2008 DC tax return (form D-40EZ, line 3 or form D-40, line 3). If you didn’t file last year in DC then you can’t use the on-line feature. A quick review of my taxes (I used H&R Block’s software) shows that I could have donated more to charity, and put more in my retirement plan.
My biggest tax break came from real estate. I paid somewhere around 11K or 13K in mortgage interest, which knocked about 2K off in personal taxes. Maybe I can use that savings to make up for the noticeable jump in real estate taxes levied by the District.
If you haven’t got your assessment, be prepared. You know that 10% cap? Yeah, forget about it. There’s now a minimum tax floor, 40% of the assessed value of the home. Not even the senior citizens’ are safe. I noticed they’re getting hit with the same floor, so not so great news for granny. But on the plus side, it does make some problem houses have an incentive to sell.
My own feelings about it are mixed. I liked having a lower tax rate because I bought before the RE boom but at the same time the low tax was like a pair of golden shackles. The tax was a great incentive not to even think of moving. But as certain things in my life change, and I can anticipate that my housing needs may change, making the tax difference from one house to another a minor factor, frees me up to ponder living elsewhere, even if that elsewhere is down the block or off in PG.