For Washington, D.C. area landlords, the tax man doesn’t rest once federal and state personal income taxes have been paid. Localities also levy business taxes and fees for rental property owners.
People who own district rental property must pay a business tax on rental income and a license fee, while landlords with rentals in Northern Virginia pay license taxes or fees.
Any owner who has a property in the district that earns more than $12,000 in gross rents in a given year must file Form D-30 and pay the unincorporated franchise tax. Landlords making less than $1 million in gross rents pay the greater of the actual tax due or the minimum tax of $250.
The D.C. tax applies even if the rental generates a federal income tax loss for the year and whether the owner lives in the district or in another state or country, said John Caldwell, managing partner at Malvin Riggins & Company, a CPA firm with local offices in D.C. and Northern Virginia. The tax is due annually by April 15.
Unlike states, D.C. cannot charge nonresidents personal income taxes, according to the DC Fiscal Policy Institute, but the franchise tax applies to D.C. business income regardless of where the owner lives.
Along with the minimum franchise tax, D.C. property owners must pay a license fee for every home or unit they rent out. For single family homes, townhouses, and condos the fee is $190.30 every two years.
In Northern Virginia, landlords owe a license privilege tax if they earn more than $10,000 in gross rental income. The tax is due March 1 or when starting the business, and is based on the prior year’s gross rental income or a new business’ estimated income.
Above that minimum, fees vary slightly. In Alexandria, landlords who make at least $10,000 but less than $100,000 in gross rents pay a minimum tax of $50. Those earning more than $100,000 in gross rents pay 50 cents per $100 in annual tax.
Arlington County charges $30 to those who earn between $10,000 and $50,000, $50 to those making between $50,000 and $100,000, and 28 cents per $100 for those earning more than $100,000.