The DC homestead tax deduction allows homeowners to lower their annual property tax bill. It can reduce the assessed value of an owner-occupied home before taxes are calculated. This deduction can make a huge difference, especially as housing costs continue to rise across the city. For many residents, it is one of the simplest ways to keep homeownership affordable.
What is the DC Homestead Tax Deduction?
The DC homestead tax deduction reduces the assessed value of a qualifying homeowner’s primary residence by $89,850 for Tax Year 2025. This means that property taxes are calculated as if the home were worth $89,850 less. With a tax rate of $0.85 per $100 of assessed value, that equals about $764 in savings every year.
It is important to note that the program only applies to homes where the owner occupies them. It does not include any rental or investment properties, second homes, or cooperative units that don’t meet ownership rules. The benefit continues every year, as long as the homeowner meets the eligibility requirements.
What is the Purpose of the DC Homestead Deduction?
Ultimately, the purpose of the deduction is to help make homeownership more affordable for the residents who live in their homes year-round. Property values in DC continue to rise, bringing tax bills up with them. The deduction somewhat neutralizes this.
Ultimately, long-term residents, seniors, and working families benefit the most. They are more likely to struggle to keep up with the increased costs. As a result of the implementation, neighborhood stability can remain high. More people are also encouraged to become homeowners, which can lead to more investments in schools, neighborhoods, and local businesses.
Who Qualifies for the DC Homestead Exemption?
Not all homeowners qualify for the DC homestead deduction. To qualify, applicants must meet these requirements:
- Ownership. The applicant must legally own the property.
- Principal Residence. The property must be the owner’s primary home.
- Residency. The owner must be domiciled in DC. This means the property is their permanent home and that they intend to return to it after any absence.
- Dwelling Units. The property must not exceed five dwelling units, including the one the owner occupies.
- Application. The homeowner must apply with the Office of Tax and Revenue (OTR). Once approved, it remains active as long as the property continues to qualify.
Understanding Proof of Domicile
To establish domicile in DC, an applicant should show that they permanently reside in the District. Common proofs include:
- A DC driver’s license or identification card
- DC vehicle registration
- DC voter registration
- Filing both federal and DC income tax returns using the home’s address
How to Apply for the Homestead Deduction in DC
When it comes to the DC homestead deduction application, most homeowners must do so electronically. Since October 1, 2021, an e-mandate has required owners to file online through MyTax.DC.gov. No login is necessary.
Applicants should select “Real Property” and then choose “Submit a Homestead Deduction Application.” If the applicant can’t file online for some reason, they can request an e-mandate waiver by calling (202) 727-4829. Upon approval, a paper form will be mailed within 3 to 5 business days.
Here are the expected processing times:
- Online Applications: Typically within 20 business days
- Paper Applications (with an approved waiver): Typically within 60 business days
Applicants will receive an email confirmation after they submit their application. After completion of the review, they will receive a decision letter via mail.
When Does the DC Homestead Deduction Take Effect?
If an approved application is filed between October 1 and March 31, the benefit applies to the entire tax year. If filed between April 1 and September 30, the benefit applies only to the second half of the tax year and will appear on the second-half bill. Once granted, the deduction automatically renews every year as long as the property remains eligible.
How Many DC Homestead Tax Deductions Can a Household Claim?
Each household may claim only one homestead in DC. If a homeowner owns more than one property, only the home that serves as their principal residence can qualify for the benefit. If a homeowner claims multiple homesteads, they may face penalties, including repaying past benefits received.
Additional Tax Relief Programs to Note
The homestead deduction can be combined with some other programs, providing even more relief for homeowners. These additional programs include the Senior Citizen or Disabled Property Owner Tax Relief and the Disabled Veterans Homestead Deduction.
Senior Citizen or Disabled Property Owner Tax Relief
Qualified homeowners who are 65 or older or disabled can receive a 50% reduction in their property tax. To qualify, they must:
- Own at least 50% of the property;
- Have a Tax Year 2023 federal adjusted gross income of less than $159,750 for Tax Year 2025; and
- Meet all other homestead requirements, including domicile and unit limit.
Disabled Veterans Homestead Deduction
Disabled veterans may qualify for a $445,000 reduction in assessed value if they meet these conditions:
- Classified by the U.S. Department of Veterans Affairs as totally and permanently disabled or paid at the 100% disability rating level due to unemployability;
- Own at least 50% of the property;
- Use the property as their principal residence;
- Have a household income under $159,750 for TY 2025; and
- The property includes no more than five dwelling units and is not a cooperative.
Properties receiving this deduction can’t also receive the standard Homestead, Senior/Disabled relief, or tax cap credit.
When to Update or Cancel a DC Homestead Deduction
Homeowners must notify the Office of Tax and Revenue if:
- They move out or rent out the entire property;
- Ownership changes through sale, divorce, or transfer to a trust; or,
- The homeowner passes away, and ownership changes.
Failure to report these changes can result in the OTR billing for back taxes and penalties. Homeowners can cancel the deduction by filing online at MyTax.DC.gov using the ASD-105 form.
Can Deductions Apply Retroactively?
The deduction begins only for the period after approval. Because of this, they can’t be applied retroactively to previous tax years, even if the owner was eligible before the application.
Similarly, the deduction can’t transfer to another home. When moving, homeowners must cancel the deduction on their old property and submit an application for the new one.
How to Verify DC Homestead Deduction
The easiest way to confirm the deduction is to check the owner’s property tax bill. It will clearly show whether the Homestead Deduction or Senior/Disabled Tax Relief is active. It will also list the credit amounts. Electronic copies of tax bills are also available at MyTax.DC.gov.
Common Reasons for Denial or Removal
Applying for a DC homestead tax deduction doesn’t guarantee approval. The OTR can deny or remove the application for several reasons, including but not limited to:
- The homeowner does not actually live in the property.
- The property exceeds five units.
- Ownership or residency documentation is missing.
- The homeowner claims multiple homesteads.
- The property was rented out in full without notice to OTR.
When OTR discovers that a property no longer qualifies, it may bill for unpaid taxes that would have been due had the deduction not been taken.
A Great Benefit for Homeowners
The DC homestead tax deduction offers valuable relief for residents who own and live in their homes. Reducing the taxable value can help make homeownership more affordable and sustainable in the long run. That said, homeowners should make sure they follow all the rules to avoid penalties.
TNWLC offers legal guidance to community associations in Washington, DC. Call us today at (202) 483-8282 or contact us online to get started!
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