Taxes on an inherited property in Washington, DC
Most families are braced for a tax bill that never arrives, and blindsided by one nobody mentioned. Here is the honest map of which taxes touch an inherited DC house, and when.
The one everybody worries about: there is no DC inheritance tax
The District does not impose an inheritance tax — a tax on the person receiving property. Maryland has one; DC does not. Receiving a house from a parent's estate is not, by itself, a taxable event for you, and it is not income you report.
What does exist is a DC estate tax, which is paid by the estate, not the heirs, and only above a threshold most estates never reach. Everything else on this page is either a tax the property already owed, or a tax triggered by what you do next.
DC estate tax: a filing threshold, indexed each year
A District estate tax return (Form D-76 or D-76EZ) is required when a decedent's gross estate exceeds the threshold for the year of death. The Office of Tax and Revenue publishes the figure by year of death; recent years look like this:
| Year of death | Gross estate filing threshold |
|---|---|
| 2023 | $4,528,800 |
| 2024 | $4,715,600 |
| 2025 | $4,873,200 |
The threshold is adjusted annually, and the year that governs is the year of death — not the year you file, and not the year the house sells. Confirm the current-year figure with OTR before relying on it.
Where those numbers come from: for deaths after December 31, 2020, D.C. Code § 47–3701(14)(D) sets the “zero bracket amount” at $4 million, increased each January 1 from 2022 by a Washington-Baltimore cost-of-living adjustment, and § 47–3705(a)(2) says no return is required if the gross estate does not exceed $1 million or the zero bracket amount, whichever is higher. “Gross estate” takes its meaning from the Internal Revenue Code (§ 47–3701(5)) — with the District-specific twist that a domestic partner is treated the same as a spouse. Above the zero bracket, § 47–3702(a-1) applies graduated rates that top out at 16%.
Two things personal representatives regularly get wrong. First, a filing requirement is not the same as tax owed — property passing to a surviving spouse is deductible, so estates over the threshold routinely file and owe nothing. Second, "gross estate" means everything, including life insurance and retirement accounts, not just the house. A modest row house plus a decent 401(k) does not usually get there, but a long-held DC property in a family that also bought elsewhere sometimes does.
The owner lived outside DC but owned a DC house
This is common in our files — a parent retired to Maryland, Virginia or further, and kept the family row house in the District. DC's estate tax reaches that house even though the owner was not a DC resident.
The mechanics are in the statute. Real property has its taxable situs where it is situated (§ 47–3701(12A)(A)), and § 47–3703(b-1) imposes tax on a nonresident who died after 2015 equal to the tax computed under the resident schedule, multiplied by the fraction of the gross estate that has its situs in the District. So the question is not whether the house alone is worth more than the threshold; it is what the whole estate looks like, and what share of it sits in DC.
The reverse applies to DC residents who owned property elsewhere: § 47–3702(a-1)(2) reduces the District tax by the proportion that real or tangible property outside DC bears to the gross estate.
One more definition matters. If no personal representative is appointed and acting in the District, § 47–3701(9) deems anyone in actual or constructive possession of DC-situs property to be a personal representative for that property and the DC tax on it. A relative who has simply been holding the keys to the DC house for an out-of-state estate should know that. The probate side of the same situation is covered in selling a DC house when the owner lived in another state.
Stepped-up basis: the reason most heirs owe no capital gains
This is the most valuable tax rule in the entire process, and the one families most often do not know about. Inherited property generally receives a stepped-up basis — its cost basis for tax purposes is reset to the fair market value as of the date of death, not what the decedent originally paid.
Two practical consequences follow, and both are why we take valuations seriously:
- The date-of-death number is a tax number, not paperwork. A low or careless valuation quietly manufactures a capital gain that did not need to exist. Our page on date-of-death valuations in DC explains what a defensible one looks like and why the tax assessment is not it.
- Waiting has a cost here too. Basis is fixed at the date of death; appreciation after that date is potential gain. In a rising DC market, holding a property for years and then selling can produce a real tax bill that an earlier sale would not have.
The rule's source is federal: 26 C.F.R. § 1.1014-1(a) states that the basis of property acquired from a decedent is its fair market value at the date of death — or at the alternate valuation date if the executor elects it — because the basis is meant to equal the value used for federal estate tax. For the small number of estates that must file a federal estate tax return, § 1014(f) and § 1.1014-10 add a consistent-basis rule: the heir's starting basis cannot exceed the value finally determined for estate tax purposes. Low-balling the house on a return to save estate tax and then claiming a high basis on the sale is exactly what that rule prevents.
Selling costs — commission, transfer taxes, settlement fees — generally reduce the gain, and gain on inherited property is generally treated as long-term regardless of how briefly you held it. Confirm both with your CPA for your situation.
Real property tax while the estate holds the house
The District's real property tax does not pause because someone died. It keeps accruing, in the estate's name, twice a year — and two changes usually make the bill go up.
The homestead deduction goes away. The homestead deduction (and senior relief, and the assessment cap) belong to an owner-occupant. Once the property is no longer the owner's principal residence, an estate should not keep claiming them, and OTR does catch this. Residential property is Class 1A at $0.85 per $100 of assessed value; losing the deduction and the senior relief can meaningfully raise the bill on a house an elderly owner held for decades. The exact rules — and the 30-day notice the statute requires — are in the next section.
Vacancy is the expensive one. DC classifies registered vacant property as Class 3, taxed at $5.00 per $100 of assessed value, and blighted property as Class 4 at $10.00 per $100. Classification is handled by the Department of Buildings, not OTR.
If the property has been sitting, deal with the vacancy classification early, keep the house maintained and looking occupied, and keep every piece of correspondence from OTR and DOB in the estate file. Unpaid DC property tax can ultimately reach the annual tax sale, which is a far worse outcome than an ugly bill.
The homestead and senior deduction after the owner dies
Most long-time DC owners had two reductions on the bill: the homestead deduction, which under D.C. Code § 47–850(a) takes $67,500, increased annually by a cost-of-living adjustment since October 1, 2012, off the assessed value of an owner's homestead; and the senior or disability deduction, which under § 47–863(b)(1) cuts the tax on an eligible household by 50% — for an owner of at least half the property who is 65 or older (or permanently disabled) with household adjusted gross income under $125,000, also indexed.
Both are tied to a living, qualifying owner's principal residence. A homestead is defined around the owner who occupies it (§ 47–849), and the senior deduction requires a “residence” entitled to the homestead deduction (§ 47–863(a)(3)). When the owner who qualified dies and nobody else qualifies in their place, the property stops qualifying.
How the timing works under § 47–850.02(b):
| When eligibility ends | What the property keeps | Authority |
|---|---|---|
| October 1 through March 31 | No deduction for that tax year | § 47–850.02(b)(4); § 47–863(f)(4) |
| April 1 through September 30 | Half the deduction, applied to the first installment only | § 47–850.02(b)(5); § 47–863(f)(5) |
| Property is deeded out 30 days or less after it stopped qualifying | No change-of-eligibility notice required | § 47–850.02(b)(2); § 47–863(f)(2) |
Two protections are worth knowing. If the estate notifies on time and pays within 30 days of the corrected bill, § 47–850.02(b)(3) bars penalty and interest. And the owner has 45 days from a notice rescinding or denying the deduction to ask for administrative review (§ 47–850.02(b-1); § 47–863(f-1)).
Who ends up owing it. If a deduction was claimed improperly and the property has since been transferred, § 47–850.02(c)(1) makes the applicant or former owner — not the property — personally liable; but if the grantee failed to record the deed on time, the property is liable (§ 47–850.02(c)(2)), and in all other cases the property carries the tax, penalty and interest (§ 47–850.02(c)(3)). For an estate, the practical reading is simple: an uncorrected deduction is a claim that can follow the house to the settlement table, where a buyer's title company will want it cleared.
If a surviving family member lives there. A surviving spouse or heir who makes the house their own principal residence does not inherit the decedent's application; they file their own. Under § 47–850(c), an approved application filed October 1 through March 31 gets the deduction for the whole tax year, and one filed April 1 through September 30 gets half, on the second installment. Where title sits in a revocable trust, § 47–863(h) preserves the senior deduction for a grantor who still lives there — see selling a DC house held in a living trust.
Taxes at the closing table
When the property is sold, DC charges two taxes on the transaction, each at the same rate, and by long-standing local custom they are typically split between buyer and seller — recordation to the buyer, transfer to the seller — though everything is negotiable in the contract.
| Tax | Rate | Usually paid by |
|---|---|---|
| Deed recordation tax | 1.1% under $400,000; 1.45% on the entire amount at $400,000 or above | Buyer, by custom |
| Deed transfer tax | 1.1% under $400,000; 1.45% on the entire amount at $400,000 or above | Seller, by custom |
Note the cliff: the higher rate applies to the whole price once the transfer reaches $400,000, not just the amount above it. On a $650,000 sale the seller's transfer tax is roughly $9,425 — a line item worth knowing about before you sign, not on the settlement statement.
Some estate-related deeds are exempt from both taxes — which matters when heirs take the house instead of selling it:
- A deed from a personal representative to a distributee made without additional consideration — § 42–1102(10) (recordation) and § 47–902(18) (transfer). Whether the exemption survives when one heir pays the others cash is a question for the title company and OTR; see when the PR or an heir buys the estate house.
- Transfers under a recorded transfer on death deed — § 42–1102(34) and § 47–902(26); see transfer on death deeds in DC.
- Certain transfers into and out of revocable trusts — § 42–1102(17)–(19) and § 47–902(12)–(14).
A sale to an outside buyer is not one of these: the estate's sale of the house is taxed at the rates above. The title company handling the estate sale will apply the right exemption codes — one more reason to use a settlement company that has closed estate transactions before.
If you rent it out instead
Renting an inherited property changes the tax picture rather than avoiding it. Rental income is reportable; depreciation starts from the stepped-up basis; and when you eventually sell, depreciation recapture and the accumulated post-death appreciation both come back into the calculation. The property also stops being eligible for any owner-occupant relief.
There is a District-specific wrinkle that has nothing to do with taxes but everything to do with your options later: if anyone is living in the property, DC tenant purchase rights (TOPA) can attach to a future sale. Decide about renting with that in mind.
A short checklist for the personal representative
- Get a written date-of-death opinion of value early — it drives the inventory, the heirs' basis, and any estate tax filing.
- Check the year-of-death DC estate tax threshold — counting the whole gross estate, and for an out-of-state owner the DC share — and diary the 10-month filing and payment date.
- Within 30 days of the house ceasing to qualify, notify OTR of the change in homestead and senior-deduction eligibility (§ 47–850.02(b)(1)); pay corrected bills within 30 days to avoid penalty and interest.
- Address vacancy classification before the next assessment cycle if the house is empty.
- Keep the property tax and any income tax filings current while the estate is open — an estate closes cleanly only if the taxes are clean.
- Budget the transfer tax into your net-proceeds estimate from day one.
Related reading: a personal representative's duties when the estate owns a house, the DC probate process start to finish, and selling estate property as a personal representative.
Rates and thresholds above are published by the D.C. Office of Tax and Revenue (Real Property Tax Rates; Vacant Real Property; Recorder of Deeds tax rates; DC Estate, Inheritance and Fiduciary Tax Information) and D.C. Code §§ 47-812 and 47-850. Statutory detail verified 2026-09-26 at code.dccouncil.gov (§§ 47-849, 47-850, 47-850.02, 47-863, 47-3701, 47-3702, 47-3703, 47-3705, 42-1102, 47-902) and 26 C.F.R. § 1.1014-1 at ecfr.gov. Rates and thresholds verified 2026-08-28 and change by tax year — confirm the current numbers with OTR, and confirm how they apply to your estate with your own CPA or attorney. Educational information only, not tax or legal advice.