Dear PoPville – Can You Lose Your Homestead Deduction for Putting an Addition on Your House?

Photo by PoPville flickr user Nikoo’s Photos

Dear PoPville,

I want to add a two car garage, fence and patio to my property. I am currently interviewing construction companies for estimates. I told one of my friends, who is also a DC resident, of my plans and she said that anyone who files a permit for an addition on their property automatically loses the homestead deduction on their taxes for one year. I can’t get anyone to answer at DCRA. Has anyone put up an addition, whether it be similar to mine or a sun room, roof deck etc and lost their homestead deduction?

9 Comment

  • T

    This seems like nonsense. If you’re living there, I don’t see why you couldn’t still claim the homestead.

  • Please come back and let us know what you find out. It sounds ridiculous, though, to lose your homestead deduction status for 1 year…how does that make sense? I always thought the homestead deduction was given to so long as the property owners live on the, well, property.

  • sounds silly…the OTR webpage says this about Homestead cancellation:

    Properties will continue to receive the Homestead benefit and/or disabled or senior citizen tax relief as long as there is no change in eligibility, such as property ownership or owner-occupancy status. Owners of properties receiving these tax benefits are responsible for notifying the agency when eligibility ceases.

    Nothing about adding an addition. Note, I added a deck and porch and maintained my deduction.

  • This is the first time I’ve heard this rumor.

    But the answer is: No, getting a building permit has no impact on a property owner’s Homestead Deduction eligibility.

    Helder Gil

  • I’d think it would depend on how much work you’re going to be doing to the house and where you’ll live while it’s being done. If you are just adding a garage and a patio, you should be able to live in the house while the work is being done, and therefore keep the owner-occupied status and the deduction.

    If, however, you were adding another floor on top and a big addition in the back and doing a gut remodel of the original parts of the house and were not going to be living there during the 9-12 months of construction, I’d think *that* might impact it, since it would be technically vacant, not owner-occupied. Even that scenario, though, I think requires too much work on the city’s part. Even with a twelve month construction timeline, you’d probably move back in before they got the papers filed to take the deduction away!

  • ah

    This is not true. You are allowed to keep the homestead deduction as long as you qualify for it–doing renovations doesn’t disqualify you.

    Here’s what is true: If you do substantial renovations in one year then you may not be eligible for the cap on tax increases that you get with the homestead deduction.

    That is, ordinarily your taxes can’t go up more than 10% in a year, even if the assessment goes up by more than that. During the boom years this meant that many people were paying far less in taxes than their actual assessment would dictate, but now that’s evened out for most people. (I.e., if your assessment went up 30% in one year, your taxes only went up 10% the next year, and could go up another 10% the following year).

    If you do a substantial renovation and your assessment goes up as a result (say from $500k to $800k) then your taxes can go up more than 10%.

  • That’s absurd.

    If you moved out for more than a year, I could see that happening, but otherwise, just having a renovation done triggering the loss of the homestead deduction is ridiculous. Who comes up with this stuff?

    Good luck with the exceptions and permits for the garage though.

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