Fairfax County Real Estate Investors Beware of BPOL

Homeowners and investors in Fairfax County are well aware that with home ownership comes the obligation to pay real estate taxes.

However, what is not as well known is that those of us that rent out homes we own (investment properties) may also owe BPOL taxes. BPOL-what you say????

If you own a small business you know that BPOL stands for Business, Professional and Occupational License Tax. They are due right about now… They are typically a percentage on the gross income of the business. E.g. for our property management firm we may have a BPOL tax-rate of 0.0031. So, for a $100,000 gross income we would pay $310.00 to the county.

Few real estate investors know that the “renting by owner of houses, apartments, commercial property or industrial facilities” also comes under the BPOL umbrella with a tax rate of 0.0026. It applies if you rent out more than 4 properties in the county in a given year.

Here is the relevant section from the Fairfax County Code of Ordinances:

Section 4-7.1-27. – Renting by owner of houses, apartments, commercial property or industrial facilities; dwelling unit defined; license tax rate; exception.

Every person who engages in the business of renting houses, apartments, dwelling units, commercial property or industrial facilities in the County shall pay an annual business license tax of Twenty-six Cents ($0.26) for each One Hundred Dollars ($100.00) of gross receipts. However, the rental receipts of any person who rents no more than four (4) dwelling units in any calendar year are not subject to taxation pursuant to this Article. For the purpose of this Section, dwelling unit means one (1) or more rooms in a house or apartment designed for occupancy by one (1) family for living purposes and which have cooking facilities. In the case of any person who as a lessee subleases any commercial property or industrial facilities, the receipts from that sublease will be exempt from taxation by this Article so long as that sublease is incidental to the primary business activity. Any rental income from a sublease described in the preceding sentence which constitutes more than ten percent (10%) of the gross receipts of the primary business activity shall be presumed to a part of a person’s primary business activity. (33-94-4.)

https://library.municode.com/va/fairfax_county/codes/code_of_ordinances?nodeId=FACOCO_CH4TAFI_ART7.1BUPROCLITA_DIV2SCLITA_S4-7.1-27REOWHOAPCOPRINFADWUNDELITARAEX

So, if you own 5 or more rental properties in the county you may want to look into this to avoid possible penalties and back taxes. A client recently had to pay back taxes going back all the way to the year he acquired his 5th property!