The deduction, which goes into effect as of January 1, 2007, would apply for buyers whose total household adjusted gross income is less than $100,000/yr. Fannie Mae and Freddie Mac require that all loans that conform to their underwriting guidelines (and that thus get the best rates) not exceed a loan-to-value ratio (aka LTV–the ratio of the amount borrowed to the appraised value of the home) of 80%; borrowers whose loans that exceed that LTV have to pay an extra monthly premium in the form of PMI, or Private Mortgage Insurance, which covers the lenders against the greater risk that they face from those higher LTV loans (since borrowers with less than 20% equity in their home are, statistically, more likely to be willing to declare bankruptcy or otherwise abandon their home if times get tough financially). Especially as borrowers discovered that they could purchase homes with less than 20% down (sometimes as low as zero-down!), borrowers with less than 20% of the home’s value available to use as a down payment have tried to avoid PMI by getting a “piggyback” loan, where they have a first loan for 80% of the value of the home, and then a second loan covering the difference between 20% of the value of the home and the amount of the downpayment.

Those second mortgages usually have much higher rates than the first mortgages–not coincidentally, the higher rates usually result in a total monthly payment for both loans of about what the borrower would have paid with a single loan plus PMI–but the “traditional” wisdom (which I never found very wise anyways) was that the two mortgages were still preferrable because the interest on the second loan is tax deductible, while PMI historically hasn’t been.

Now that PMI has the same tax advantages as a piggyback mortgage, though, it hopefully will become more obvious to buyers that they really need to run the exact numbers to see which type of loan saves them the most money, rather than using a generic rule of thumb that is often incorrect. (Also, it’s worth noting that PMI can be removed from your loan once your equity reaches 20% of the original loan amount, while a second mortgage is only removed once you’ve paid it off–in an appreciating housing market, your equity in the house will reach 20% well before you’ve paid 20% in down payment plus principal payments on your loans; buyers really need to include things like current market conditions and how long they plan on staying in a particular home or loan in their decision making process, since that can make a big difference in which loan to obtain.)

Are you wondering whether to go with two piggyback loans or single loan with PMI? and we’d be glad to set up a free, no-obligation consultation with you to go over your entire situation and help you decide what type of loan program is best for you.

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An overview of the real estate tax rates for the jurisdictions in the metro DC area where most of our clients are purchasing real estate is given below, along with links to the appropriate websites for the jurisdictions in question. Unless otherwise noted, taxes are cumulative between overlapping jurisdictions. For example, the taxes levied by the Town of Herndon (in Fairfax County, VA) are in addition to the taxes levied by Fairfax County; similarly, the taxes levied by Montgomery County, MD, are in addition to the taxes levied by the State of Maryland.

Some jurisdictions also create special tax districts that impose additional taxes on properties within those districts, to fund specific local projects such as maintenance or improvement of a specific transportation corridor; we note those jurisdictions below. If a special tax district covers all (or nearly all) of the jurisdiction in question, we include those additional taxes in the rate shown for the jurisdiction, and note that fact.

The information provided here is compiled from official sources published by the jurisdictions in question or (where necessary) reputable news sources, and is believed to be correct as of the date indicated. This information is not guaranteed, however, and buyers who are concerned about their potential tax burden when purchasing a home should always contact the appropriate taxing authorities to confirm all applicable tax information about the property in question.

• District of Columbia: 0.8500% (last verified 7/1/2009)

  DC Office of Tax & Revenue

  DC Property Tax Rates

• Maryland: 0.1120% (last verified 7/1/2009)

  (Note: 2009 values not officially published as of 7/1/2009, but they appear to have remained at 0.112% as they were for the previous 3 years.)

  MD Department of Assessments and Taxation

  MD State Property Tax Rates

  MD County/Locality Property Tax Rates

  • Howard County: 1.0140% (as of 7/1/2009)

    Howard County Department of Finance

  • Montgomery County: 0.8630%-2.7230% (as of 7/1/2009)

    Montgomery County Department of Finance–County Taxes

    Note: Montgomery County calculates real estate taxes based on a property’s classification into one of 46 tax classes spanning 39 special tax districts that can levy up to twelve “special service area” taxes. Specific rates for a given property can vary from as low as 0.8630% to as high as 2.723% (not including the additional tax levied by the State of Maryland); a rough summary of those rates can be found online at the MD County/Locality property tax site linked to above, and a more detailed table is available on the Montgomery County Dept. of Finance website, but it is imperative that a prospective buyer of a property in Montgomery County check with the county and the public record to verify the specific tax rate in effect for that specific property.

  • Prince George’s County: 0.9600% (as of 7/31/2009)

    PG County Department of Finance–Real Property

    Note: Prince George’s County calculates real estate taxes based on a system almost as arcane as that of Montgomery County, and further complicates issues by not publishing their tax tables on their website. The rate listed above is the base rate as claimed by the state, but specific rates for a given property can vary from that value significantly depending on the locality of a particular property; a rough summary of those rates can be found online at the MD County/Locality property tax site linked to above, and a more detailed table is available on the Montgomery County Dept. of Finance website, but it is imperative that a prospective buyer of a property in Prince George’s County check with the county and the public record to verify the specific tax rate in effect for that specific property.

• Virginia: No state-wide tax

  • Arlington County: 0.8750% (as of 8/1/2009)

    Arlington Department of Real Estate–Tax Assessment Rates

    Note: The Arlington County base tax rate is 0.8650%; however, a county-wide Sanitary District tax was created in 2009 that adds an additional 0.0100% to the tax rate, resulting in the rate listed above. This additional levy is not currently (as of 8/1/09) reflected on the Arlington DRE website, but the assessor’s office confirms that levy, and local settlement companies are including it in their calculations.

  • Alexandria (City of): 0.9030% (as of 5/1/2009)

    Alexandria Department of Finance–Real Estate Tax

  • Fairfax County: 1.0510% (as of 8/1/2009); special tax district rates may also apply.

    Fairfax County Department of Tax Administration–Tax Rates

    Fairfax County DTA–Other Tax Districts

    Note: The Fairfax County base tax rate is 1.0400%; however, a county-wide Stormwater District tax was created in 2009 that adds an additional 0.0100% to the tax rate, as well as an existing county-wide Pest Prevention tax district of 0.0010%, resulting in the rate listed above. Note that additional tax districts are common in Fairfax County; please verify the specific tax amount for any property that you are considering purchasing.

    • Herndon (Town of): 0.2400% (as of 7/1/2009)

      Town of Herndon–Taxes/Licenses

    • Vienna (Town of): 0.2281% (as of 7/1/2009)

      Town of Vienna–Real Estate Taxes

  • Fairfax (City of): 0.8800% (as of 8/1/2009)

    City of Fairfax–Real Estate Tax

    Note: The City of Fairfax does not list their current tax rate on their website; the value given above is the value shown in an example on that website, and was confirmed to us when we called the City Treasurer’s office, but since the City of Fairfax does not officially publish this rate anywhere, extra caution should be used when estimating taxes using this number.

  • Falls Church (City of): 1.0700%

  • Loudoun County: 1.2450% (as of 7/1/2009); special tax districts may also apply.

    Loudoun County–Taxes and Decals

    To check the special tax district status of a given property, look up the property on the Loudoun County tax assessor website and click on “Tax History” to see what tax districts the property is in.

  • Manassas (City of): 1.3500% (as of 5/1/2009); special tax districts may also apply.

    City of Manassas–Tax Rate Schedule

  • Manassas Park (City of): 1.6500% (as of 5/30/2009)

    City of Manassas Park–Treasurer

    Note: The City of Manassas Park does not list their current tax rate on their website; the value given above is the value reported in news sources and public documents, but to confirm an exact value, the City Treasurer’s office should be contacted directly.

  • Prince William County: 1.12891% (as of 7/1/2009); special tax districts may also apply.

    Prince William County–Tax Rates

    Note: The Prince William County base tax rate is 1.212%; however, a county-wide special tax district to fund Gypsy Moth control and another nearly-county-wide (excluding the Town of Quantico) district to fund Fire & Rescue services have been created that add an additional 0.0025% and 0.0746% respectively to the tax rate, resulting in the rate listed above. Additional special tax districts may also apply.

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