Save Big $$  in DC Real Estate Purchase

DC Offers two different opportunities to save money when buying a home not to be confused with one another: 

1. DC First Time Homebuyer Program

 2. DC Tax Abatement Program

These are two distinct programs in DC. The First Time DC Homebuyer Program (referenced by the pros as “FTDO” (fit-do)) is a program that lowers the buyer’s Recordation Tax if they meet certain price and income guidelines. If the Sales Price is $632,500 or less, and the buyer’s prior year’s AGI is within the income guidelines, the Recordation Tax is reduced from 1.45% or 1.1% (depending on the Sales Price) to 0.725%.

 The DC Lower-Income Tax Abatement Program is a separate program with lower Sales Price and Income guidelines (Sales Price of $464,000; Income of $65,100 for a single member household). Tax Abatement uses lower limits because the benefits are much larger. In addition to the prior year’s 1040, Tax Abatement also requires the prior year’s W-2 and two current paystubs (since approval is based off of annualized income instead of the prior year’s AGI alone). If a buyer that qualifies for Tax Abatement, they are entitled to three significant benefits:

  1. The Buyer’s Recordation Tax is waived (a savings of 1.45% or 1.1% depending on the sales price).
  2. Instead of paying the Transfer Tax to DC, the Seller gives a credit to the buyer in the amount of what the Seller’s recordation tax would have been (a credit of 1.45% or 1.1% depending on the sales price).
  3. The Buyer’s property taxes are waived for the first 5 full years of ownership (so long as their income remains below the limit; subject to annual verification of income).

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