Certain costly D.C. homes would face a 2.5% property tax

D.C. would assign a 2.5% rate to the entire taxable value of covered homes above an inflation-adjusted $2.5 million cutoff. The Class 1C group would cover D.C. homes with up to two dwelling units or up to two adjoining condos under one owner, excluding housing cooperatives. Owners must not claim the homestead deduction, a tax break for a primary home. Covered homes at or below the cutoff would have a listed rate of 0.85%. The cutoff would adjust annually for inflation, rounded down to the nearest $1,000. Exceptions would apply, and the mayor would also calculate tax rates each year. These rules would apply from tax year 2027.

Owners would have to prove to the mayor that they meet an exception to the Class 1C tax rates. Exceptions would cover homes meeting construction, rental, or listing rules. Federal owners must keep their legal home outside D.C. all tax year: elected federal officials, Supreme Court justices, Senate-confirmed appointees serving at the president's pleasure, and congressional staff who are residents of the same state as the official they work for. Construction must prevent the owner or tenant from occupying the home for at least six months of the tax year. This exception could be claimed in only two years out of every five. Rentals need a valid rental license and tenants paying market rent for at least nine months of the year. The lease must cover the whole home for at least 12 months, or continue month to month after such a lease ends. Sale or rental listings must be at market rates for no more than nine months of the year. For the rental and listing exceptions, the owner cannot sleep there for six consecutive hours or more at any time that year.

The mayor would calculate rates for all three residential tax groups and send them to the D.C. Council. Each group's target would use the previous year's estimated tax collections, increased by the smaller of 7% or that group's percentage growth in total assessed value. Calculated rates would be rounded up to the nearest cent per $100 of taxable value. Calculations would begin in tax year 2027, with rates due to the Council by January 5 each year. The act would take effect after mayoral approval or a veto override and a 30-day congressional review.