We all love living in the District, but rising home values and rental rates are making it harder and harder for many people to make ends meet. It’s great when our homes are worth more, but it also means a larger property tax bill that can be tough for many with stagnant or fixed incomes. The DC Council is considering revamping the city’s property tax credit to help low-income home owners and renters, and now is a great time to do it.
The District, like many states around the country, offers a tax credit for low-income home owners and renters. The credit (known as “Schedule H” in tax jargon) attempts to help to those District residents who are spending a significant portion of their income on property taxes. And because landlords often pass their property tax burden on to their tenants, it allows renters to claim the credit as well. Unfortunately, as it exists today, the credit does little to help the residents whose property taxes take a large chunk of income.
How does it work? It’s a bit complicated, and that’s part of the problem. Residents qualify for the tax credit if they earn less than $20,000 per year and spend higher than a certain percentage of their income on property taxes. This percentage threshold varies from 1.5 to four percent depending on income and senior status. If eligible, the resident can claim a credit of up to $750, and equivalent to a percentage of the property tax (for renters, the property tax is computed as 15 percent of the rental amount).
Though a step in the right direction, this credit needs revision if it is going to provide real help for today’s District residents. The credit is outdated, complex, and difficult to qualify for, which limit the help it offers. The DC Council currently is considering Bill 19-164, the “Schedule H Property Tax Relief Act of 2011,” to make the necessary adjustments to the tax credit.
Changes include:
- Raising the income limit from $20,000 to $50,000 and including a cost of living adjustment. The maximum income limit has never been adjusted for inflation and should be raised to reflect the realities of today’s economy.
- Increasing the maximum benefit from $750 to $1,000 and including a cost of living adjustment. The benefit amount has not been adjusted for inflation since the credit came into existence in the 1970s.
- Simplifying unnecessarily complex rules that limit participation. Most importantly, the rules require people or families sharing a home to apply together even if they do not share income or file tax returns together. This often makes it impossible for many people to qualify.
- Increase the property tax rent equivalent from 15 to 20 percent. The District assumes that about 15 percent of the rent paid by a renter is for property tax, this bill will increase that amount to 20 percent.
The DC Council has the power to offer some help to people who live in the District and are struggling to make ends meet. Improving the low-income property tax credit is one way to reach seniors and others living on fixed incomes, as well as working District residents who feel the economic strain caused by rising property taxes. When the Council returns from recess, DCFPI hopes the low-income tax credit will be on top of the legislative agenda.
