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D.C. tax tidbit: special tax hurdles

District_of_Columbia_Flag The Nation's Capital, although not a state, relies on much of the same revenue raising options as the country's other taxing jurisdictions.

Real estate taxes account for most of the District of Columbia's income, followed by individual income tax receipts and then sales tax collections. 

But Washington, D.C., finance officials say that because of its special circumstances, the capital city is hamstrung in those fiscal efforts. The District, they note in the 2009 edition of D.C. Tax Facts, faces several tax-collecting hurdles:

  • It has a narrower property tax base because of the substantial amount of federally owned tax-exempt property in the city.
  • It is prohibited from collecting a commuter tax on individuals who work in D.C. but live in the Maryland and Virginia suburbs.
  • Exemptions are granted for land held by foreign governments.
  • Congress has limited the height of buildings in the District, which hampers economic development.

The hubby and I spent some time in D.C. proper before moving to the Maryland suburbs, and I was very grateful that we didn't have to hassle with a commuter tax after our relocation.

And while I'm sympathetic to the loss of potential funds from all the wonderful federal and foreign buildings -- more than 57 percent of the District's land tax exempt -- those landmarks make D.C. an incredibly special place.

So the next time you visit Washington, pick up an extra tchotchke or two. Not only will they make fun gifts for the folks back home, but you'll be helping our Nation's Capital put a few more dollars in its treasury!

Tax trip around the United States: This is part of our series highlighting tax information from the 50 U.S. states and Washington, D.C. You can read other state tax blurbs at our Complete menu of tasty state tax tidbits.

The State Tax Departments page provides links to official state and District of Columbia revenue Web sites so that you can find out more about your home's tax laws and filing requirements.

As we work through the 2010 tax season, a different state will be featured each day as noted in Don't forget your state taxes! Check back to see what tax tidbit we share about your home.

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