In these times of tight municipal budgets, you’d better believe the District is aggressively auditing these valuable tax exemptions. In 2006, the Office of Tax and Revenue established a separate Homestead Audit Unit. According to the office’s spokeswoman, Natalie Wilson, the audit unit conducts approximately 10,000 “annual” audits and up to 3,000 “daily” audits.
The properties selected for annual audits are chosen randomly. The daily audits are triggered by tax fraud tips, rental reports, multiple-property ownership records, duplicate homestead applications, audits of senior citizens with more than $100,000 in total household federal adjusted income and other researched reports that could indicate underpayment of taxes.
This unit has been quite successful. In fiscal year 2010, it collected approximately $6.6 million in additional revenue for the District’s coffers. There is no statute of limitations on how far back the District can audit, bill and seek to collect delinquent taxes, penalties and interest. Consequently, these audits and resulting bills can amount to a significant amount of money for the unsuspecting homeowner.
The homestead exemption is available only to individual homeowners domiciled in the District who maintain the property as their principal residence. Properties owned by limited liability companies, corporations or most trusts are not eligible.
To establish the District as your domicile you must take certain steps. The District will look to see if you have obtained a District driver’s license, registered your vehicle in the District, registered and voted regularly in the District and filed federal and District income tax returns from the property listed on your homestead application. If you have not taken any of these steps, it is highly unlikely you will qualify.
Note that members of Congress and congressional aides are generally not considered to be domiciled in the District. Active-duty military personnel can declare the District as their domicile by filing Form DD 2058 with their military finance office.
In addition to the domicile requirement, the senior-citizen exemption requires that at least one homeowner be 65 or older. The household’s federal adjusted gross income must be less than $100,000.
The homestead exemption protects the first $67,500 in assessed value from tax. Under current tax rates, this reduces the homeowner’s annual real-property tax by $573.
The senior-citizen exemption can be far more valuable because each year it reduces the senior’s real-property taxes by 50 percent.