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Just found out the income tax is much higher in DC than MD and VA..... Will we pay a lot more in taxes all around if we live in DC (income, real estate, etc)?
We are planning on buying a home in the 800k range, and I would much rather live in NW DC, but don't want to end up paying through the nose for it...
Can anyone shed some light on the real tax differences????
DC income taxes are higher than in VA or MD, and the quality of public services such as schools is much lower. DC has a very high percentage of poor people who don't pay much in taxes, so others (those who live in $800k houses) have to make up the difference. Live in DC if you must, but you will definitely pay a premium to do so. You can probably find a website that compares the annual tax burden in the three jurisdictions. Arlington County usually comes out the lowest because of its low real property tax rate.
Just found out the income tax is much higher in DC than MD and VA..... Will we pay a lot more in taxes all around if we live in DC (income, real estate, etc)? We are planning on buying a home in the 800k range, and I would much rather live in NW DC, but don't want to end up paying through the nose for it...
Can anyone shed some light on the real tax differences????
The DC Government is required by law to prepare annual comparisons of its tax rates and burdens to those of nearby MD and VA counties. The 2006 Report based on 2005 data can be found here...
The most meaningful table is likely the one on page 19. In brief, it will show the two MD counties as having the highest overall tax burden at income levels up to $150K, then comes the District, then the three VA entities. Basically, if you can afford the $800K house, you can afford the taxes...
Your tax burden will vary from state to state depending on your income and our lifestyle, but you can expect it to be relatively high anywhere in the DC metro area. Income tax is higher in DC, so if you have a very high income, DC might be substantially more expensive for you. For most people, though, the tax burdens between MD, DC, and VA really aren't all that significant. This article from the Washington Post outlines some of the differences Who Pays More Taxes? Virginia, Maryland or D.C.? - Raw Fisher
According to that article, the difference in tax burden from highest (Montgomery County, MD) to lowest (Alexandria) is less than $2,000 per year for someone earning around $75,000 per year. It is only around $3,500 per year if you earn around $150,000. To me the difference of a few thousand dollars is less significant than many other differences between the areas, but even the importance of those issues will depend on your circumstances. For a lot of people, the higher tax in DC is easily counterbalanced by the dramatic reduction in commuting time. If living in DC means only having one car as opposed to two, that probably makes up for the tax difference right there. On the other hand, DC schools aren't very good and if you feel you need to send your child(ren) to private school because you don't like the public schools, the cost of tuition might well be higher than your entire income tax and property tax bills.
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