Councilmember David Grosso has proposed a new “mansion tax” for residences throughout the District. While the name would suggest it would only apply to places with butlers, and lead pipes in the conservatory, and such, that’s not quite true. Depending on how much your home is assessed, it could apply to you. Here’s how.
The tax only would kick in for assessed values over $1.5 million. So if you merely own a humble abode of $1.5 million or less, you wouldn’t be affected.
Now before we go further, keep in mind that this is for assessed values, not true market values. And it would probably only really apply to taxable assessed values, which is often less than the overall assessment due to various things such as the homestead deduction. So if you’re not sure, pull out your tax bill and see what your taxable assessment is.
Ok, so you’re part of the lucky ones that own a house assessed for more that $1.5 million, your tax bill still won’t go up that much, at least not until we get to the real pricey territory.
Here’s how real estate taxes work: The city takes your taxable assessed value, divides it by 100, then multiplies it by $0.85. So if your home has a taxable assessment of $1 million, they divide it by 100 (which gives you 10,000), then multiply that by $0.85. Thus your annual tax bill would be $8,500. (As an aside, this is really a very low tax rate. Arlington taxes $0.996 per $100 assessment. Montgomery County’s rates vary by neighborhood, but are all well over $1.00 pr $100).
The mansion tax would apply a $1.25 rate to the assessed amount over $1.5 million. So a home with a $2 million taxable assessment would pay the normal rate on the first $1.5 million ($12,750). And it would pay the higher $1.25 rate on the remaining $500,000 ($6,250), resulting in a total bill of $19,000. Under the current rules, the same house would pay $17,000. Thus this would represent a $2,000 tax increase.
An even higher rate would apply to values over $5 million. That rate would be $1.50. So a $10 million dollar home (let’s face it, a genuine mansion) would see its annual tax bill climb from $85,000 to $131,500
This would be a pretty big jump. But how many people who own $10 million homes would genuinely be impacted by this? If it’s too much, they can always just downsize to a mere $1.5 million abode.
Mr. Moneybags doesn’t have to worry about moving anytime soon though. The bill was referred to the Finance Committee and it’s unclear what chances it has to be actually passed.