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By Jeremy Chitlik, Senior Director | Rebecca Miller, Manager | November 16, 2020

3 tips to managing your property taxes in the District of Columbia

The current pandemic has caused a lot of uncertainty in our lives and the economy. That said, we are quite certain of one thing – if you own a property in Washington, D.C. it is probably over assessed for the 2021 tax year.

For more than ten years, our local office has worked with property owners and DC assessors to achieve tax bills proportionate to the economic climate and the standing of your property. That’s the key: proportionate to both market factors and unique building details. Our years of experience and dedicated DC experts make it simple for us to review your tax assessment and identify savings opportunities. So that is #3 on our list.

#1 and #2 are issues we see every year – simple items overlooked by our clients or other consultants, that can have an immediate impact on your DC property tax bill.

#1 Complete the District of Columbia Income and Expense Form

DC OTR Income and Expense information

Missing the required annual I&E filings will result in a 10% penalty each year for each property missed. Beyond keeping that money in your pocket, completing the form reliably will have an impact on the accuracy of your final assessed value. Even if the I&E information does not get factored into an assessment upfront, having it on file improves the chances of a successful appeal.

Often, property owners will hesitate to complete an I&E, or adjust the data entered, if a property is performing well. The concern is that this might bolster the value in future years or bolden the assessor in refusing to lower an assessment during an appeal. On the contrary, completing an accurate and consistent I&E every year will paint a picture of a property for the assessor that can be leveraged in good times and bad. When times are good and competition is strong, owners offer competitive rents or complete grand capital improvements to attract credit tenants. When times are hard, a property may experience a larger decline in occupancy than the market or have an arduous time collecting rents even if the building is not vacant. These are property level factors that must be presented through the annual completion of the income & expense form.

#2 Watch your property classification

DC OTR Property search

Perhaps it makes sense that a city built on the ideals of a fair democracy would create a progressive property tax system that also encourages one to be a good neighbor. The result is a six-part tax rate based on the use and condition of each property.

Class Tax rate per $100 Description
1 $0.85 Residential multifamily
2 $1.65 Commercial property under $5 million
2 $1.77 Commercial property between $5 million and $10 million
2 $1.89 Commercial property over $10 million
3 $5.00 Vacant land
4 $10.00 Blighted property

Understanding the classifications and, more importantly, when they change, can result in notable property tax savings. Changing the intended use of a property, whether it’s being repositioned or completely rebuilt, is an important time to look this over. In addition, DC will issue a mixed-use form for any property that has uses that span across 2 different tax classes.  The form is very simple with just four line items.  Failure to complete this form will result in the entire property being classified as commercial, which will dramatically increase taxes.

Case in point
One of our clients was building new ground-up multifamily, but the previous use of the property was commercial office. Our team noticed the classification had not been updated, and this one simple change saved our client over $300,000.

#3 Partner with a tax consultant

The United States has one of the most fractured property tax systems in the world, so we cannot emphasize this point enough. Make sure your tax consultant has local knowledge. Altus Group’s dedicated D.C. team represents close to $30 billion of commercial real estate in the District. Alongside managing property assessment appeals, a good tax consultant will provide advice and strategies to maximize tax savings and assist with forecasting and budgeting for future years.

Lastly, download our brochure for a quick reference of the tax rates, classifications, and the annual District of Columbia property tax calendar so you can be prepared for the numerous notices and deadlines that occur each year.

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