Washington DC has a state income tax, even though it is not a state

Washington DC collects an income tax on residents and workers, just as states do. The tax is administered by the DC Department of Finance and Revenue, and the rates and rules are similar to what you would find in most states — but DC is not a state, which creates some unusual situations for people who live or work there.

DC residents pay a local income tax on wages, self-employment income, investment income, and other earnings. The tax brackets change each year, but as of 2024, the rate ranges from 4 percent on the lowest incomes to 10.75 percent on the highest. If you work in DC but live in Maryland or Virginia, you may owe DC tax on your wages, though your home state usually gives you a credit to avoid double taxation.

Key Takeaways

  • Washington DC collects income tax on residents and on people who work within the district, with rates ranging from 4 percent to 10.75 percent depending on income.
  • If you live in DC, you file a DC tax return in addition to your federal return, using Form D-40 or D-40NR depending on your residency status.
  • If you work in DC but live in Maryland or Virginia, you owe DC tax on wages earned there, but your home state usually credits that tax so you do not pay twice.
  • DC does not have a separate sales tax; instead, it applies a combined sales and use tax rate that varies by product category, ranging from 5.75 percent to 10 percent.
  • Property owners in DC pay property tax to the district, calculated on the assessed value of real estate and collected by the Office of the Assessor.

DC income tax brackets and rates for 2024

DC income tax is progressive, meaning the rate increases as your income rises. You do not pay the top rate on all your income — only on the portion that falls within each bracket. The brackets are adjusted each year for inflation, so the exact dollar amounts change annually.

As of 2024, DC tax brackets for single filers start at 4 percent on income up to roughly $10,000, then move through 6 percent, 6.5 percent, 8.5 percent, 9.5 percent, and finally 10.75 percent on income above roughly $350,000. Married couples filing jointly have higher bracket thresholds. The DC Department of Finance and Revenue publishes the exact brackets each January on their website, so check there for the current year if you are filing.

DC also taxes capital gains, dividends, and interest income at the same rates as wages. If you are self-employed, you owe DC income tax on your net business income, and you may also owe DC self-employment tax, which is similar to federal Social Security and Medicare taxes.

Who has to file a DC income tax return

You must file a DC return if you are a resident of DC and your income exceeds the filing threshold for your filing status. The threshold changes each year but is generally lower than the federal threshold. Even if you do not owe tax, you may want to file if you had taxes withheld from your paychecks, because you could receive a refund.

If you are not a DC resident but earned income in DC, you may still owe DC tax on that income. You would file Form D-40NR (Nonresident Income Tax Return) instead of the resident form. Maryland and Virginia both have reciprocal agreements with DC, meaning if you live in one of those states and work in DC, you can claim a credit on your home state return for taxes paid to DC, so you do not pay the full rate in both places.

DC residents who move away during the year are considered part-year residents and file Form D-40 with a notation of the move date. The tax is prorated based on how many months you lived in DC.

How to file your DC income tax return

DC residents file using Form D-40 (Resident Income Tax Return). You can file on paper by mailing it to the DC Department of Finance and Revenue, or you can file electronically through the department's website or through tax software that supports DC returns. Many common tax software packages include DC forms.

The important date to file is the same as the federal important date — typically April 15, though it shifts if that date falls on a weekend or holiday. If you need more time, you can request an extension, which gives you until October 15 to file (though taxes are still due by April 15 if you owe).

You will need your Social Security number, information about your income from all sources, records of any taxes withheld from your paychecks, and documentation of any deductions or credits you claim. DC allows a standard deduction (which changes each year) or itemized deductions, similar to the federal return.

Sales tax and property tax in DC

DC does not have a separate sales tax rate. Instead, the district applies a combined sales and use tax that varies by what you buy. Most goods are taxed at 5.75 percent, but certain categories are higher: prepared food and alcohol are taxed at 10 percent, and some other items fall in between. Groceries and prescription medications are generally not taxed.

If you own property in DC, you pay property tax to the district each year. The tax is based on the assessed value of your real estate, set by the Office of the Assessor. Property tax bills are mailed by the Office of the Chief Financial Officer, and payment is due in installments throughout the year. The rate varies depending on the type of property — residential, commercial, or industrial — and the assessed value.

Tax credits and deductions available to DC residents

DC offers several tax credits that can reduce what you owe. The Earned Income Tax Credit (EITC) is available to low- and moderate-income workers and is calculated based on your federal EITC. DC also offers a Child and Dependent Care Credit, a Residential Rental Property Credit for landlords, and credits for property taxes paid and for taxes paid to other jurisdictions.

You can claim the standard deduction or itemize deductions, just as you do on your federal return. DC allows deductions for mortgage interest, property taxes, charitable contributions, and other expenses, subject to the same limits as the federal return. Some deductions are DC-specific — for example, you can deduct contributions to certain DC-sponsored savings programs.

If you are over 65, disabled, or blind, you may be may have access to to an additional standard deduction. Check the DC Department of Finance and Revenue website or Form D-40 instructions for the current amounts.

What happens if you do not file or pay on time

If you owe DC tax and do not file by the important date, the department assesses a failure-to-file penalty of 5 percent per month (up to 25 percent total) on the unpaid tax. If you file but do not pay, you owe a failure-to-pay penalty of 0.5 percent per month (up to 25 percent) plus interest on the unpaid balance. Interest accrues daily at a rate set by the department each quarter.

If you believe you cannot file or pay by the important date, you can request an extension before April 15. An extension gives you until October 15 to file, but it does not extend the payment important date — taxes are still due by April 15, and interest and penalties explore to any unpaid balance after that date.

If you have not filed in previous years, you can still file now. The department has a statute of limitations, generally three years for assessment, though it can be longer if you underreported income. Filing late is better than not filing, because it stops the failure-to-file penalty from accruing further.

Frequently Asked Questions

Do I owe DC tax if I work in DC but live in Maryland or Virginia?

Yes, you owe DC tax on wages earned in DC. However, Maryland and Virginia both credit DC taxes paid, so you do not pay the full rate in both places. File your home state return and claim the credit for taxes paid to DC; your home state will reduce what you owe there by that amount.

Is DC income tax deductible on my federal return?

Yes, if you itemize deductions on your federal return, you can deduct state and local taxes (SALT) paid, including DC income tax. The deduction is capped at $10,000 per year for most filers. If you take the standard deduction instead, you cannot claim the DC tax deduction.

What if I moved to DC partway through the year?

You are a part-year resident and file Form D-40 with the date you moved. Your income is prorated — only the income earned while you lived in DC is subject to DC tax. Include documentation of your move date, such as a lease or utility bill showing when you arrived.

Can I file my DC return electronically?

Yes. The DC Department of Finance and Revenue accepts electronic filing through their website, and most tax software packages that support DC returns can file electronically. You can also file on paper by mail. Electronic filing is faster and reduces errors.

What is the DC Earned Income Tax Credit, and how much is it?

The DC EITC is a refundable credit for low- and moderate-income workers. The amount depends on your income, filing status, and number of may have access to children. It is calculated based on your federal EITC but is a separate DC credit. Check the DC Department of Finance and Revenue website or Form D-40 instructions for the current credit amounts and income limits.