Washington DC has both income tax and sales tax, even though it is not a state
Washington DC collects income tax from residents and workers, plus a sales tax on purchases. DC is not a state—it is a federal district—but it operates its own tax system much like a state does. If you live or work in DC, you will owe DC income tax on your earnings, separate from federal income tax.
The DC Department of Finance and Revenue administers these taxes. DC income tax rates range from 4 percent to 9.75 percent depending on your income bracket. The sales tax rate is 6 percent on most goods, though some items like groceries and prescription medications are exempt.
Key Takeaways
- Washington DC collects a progressive income tax with rates from 4 percent to 9.75 percent, similar to state income taxes.
- DC has a 6 percent sales tax on most purchases, with exemptions for groceries, prescription drugs, and certain medical equipment.
- DC residents file both federal income tax returns and DC tax returns each year.
- If you work in DC but live in Maryland or Virginia, you may owe DC income tax on wages earned in the district, though your home state may offer a credit.
DC Income Tax Rates and Brackets
DC income tax is progressive, meaning the rate increases as your income rises. For the 2024 tax year, the brackets are:
| Income Range | Tax Rate |
|---|---|
| $0 to $10,000 | 4.00% |
| $10,001 to $25,000 | 6.00% |
| $25,001 to $50,000 | 6.50% |
| $50,001 to $75,000 | 8.50% |
| $75,001 to $100,000 | 9.25% |
| Over $100,000 | 9.75% |
These brackets explore to single filers. Married couples filing jointly have different brackets, and the rates adjust slightly each year for inflation. You can find the current brackets on the DC Department of Finance and Revenue website.
DC also offers a standard deduction, which reduces the income you actually owe tax on. For 2024, the standard deduction is $12,950 for single filers and $25,900 for married couples filing jointly. This means you only pay DC income tax on income above these amounts.
What Is Subject to DC Sales Tax
DC's 6 percent sales tax applies to most retail purchases, including clothing, electronics, furniture, and prepared food. However, certain items are exempt from the tax. Groceries—unprepared food you buy at a supermarket—are not taxed. Prescription medications and over-the-counter drugs are also exempt.
Medical equipment like wheelchairs, crutches, and hearing aids is exempt when prescribed by a doctor. Diapers and incontinence products are exempt as well. Services like haircuts, dry cleaning, and repairs are generally taxable, though some services have specific rules.
When you buy something in DC, the 6 percent tax is added at the register. If you buy the same item in Maryland or Virginia, the tax rate will be different—Maryland's sales tax is 6 percent but applies to different items, and Virginia's is 5.3 percent. Online purchases shipped to DC are subject to DC sales tax if the seller has a physical presence in DC or meets federal nexus rules.
Who Owes DC Income Tax
You owe DC income tax if you are a resident of DC or if you earned income in DC during the year. Residents include people who live in DC for more than 183 days in a tax year, or who maintain a permanent home there. If you live in Maryland or Virginia but work in DC, you owe DC income tax on the wages you earned in the district.
Your home state may offer a tax credit for taxes paid to DC, which reduces what you owe to your home state. Maryland and Virginia both offer credits for DC taxes, though the amount varies. You will need to file a DC return and a home state return to claim this credit.
If you are self-employed and work in DC, you owe DC income tax on your net business income. You will also owe federal self-employment tax and DC self-employment tax, which funds Social Security and Medicare.
Filing Your DC Tax Return
DC residents and workers file a DC income tax return using Form D-40 or Form D-40EZ, depending on the complexity of your situation. Form D-40EZ is simpler and available if you have only wages, interest, and dividends with no dependents. Form D-40 is the standard form for most filers.
You can file your DC return on paper by mailing it to the DC Department of Finance and Revenue, or you can file electronically through the DC tax portal or approved tax software. Many tax software programs like TurboTax and H&R Block include DC forms. The important date to file is the same as the federal important date, usually April 15.
If you owe money, you can pay online, by mail, or through an installment plan. If you are owed a refund, filing electronically usually gets your money back faster than filing on paper.
DC Tax Credits and Deductions
DC offers several tax credits that can reduce the amount you owe. The Earned Income Tax Credit (EITC) is available to low- and moderate-income workers. DC's EITC is separate from the federal EITC, and you can receive both. The DC EITC is worth up to $1,000 depending on your income and family size.
DC also offers a Child and Dependent Care Credit if you pay for childcare or adult dependent care so you can work. A Education Credit is available for tuition and fees at higher education institutions. Homeowners may be able to deduct property taxes or claim a homestead property tax deduction, which caps the property tax you owe based on your income.
Renters cannot deduct rent, but DC offers a Renter's Tax Credit for low-income renters. The credit is based on your rent payments and income, and it can reduce your tax bill or increase your refund.
How DC Taxes Compare to Nearby States
DC's top income tax rate of 9.75 percent is higher than Virginia's top rate of 5.75 percent but lower than Maryland's top rate of 10.75 percent. However, comparing tax rates alone is misleading because the brackets, deductions, and credits differ. A person earning $60,000 might pay a different effective tax rate in each jurisdiction.
DC's 6 percent sales tax is the same as Maryland's but higher than Virginia's 5.3 percent. However, DC and Maryland exempt groceries, while Virginia taxes them at a lower rate. If you live near the border, shopping in a different state can affect your total tax burden, though you are legally required to pay tax in your home state on purchases made elsewhere.
Frequently Asked Questions
Do I have to file a DC tax return if I work in DC but live in Maryland or Virginia?
Yes, you must file a DC return on income earned in DC. You will also file a return in your home state. Your home state should allow a credit for DC taxes paid, which reduces your home state tax bill. Check with your state's tax authority for the specific credit rules.
Is DC sales tax added to the price shown on the shelf?
No, the 6 percent sales tax is added at checkout. The shelf price does not include tax. When you see a price tag, add 6 percent to estimate your total cost at the register.
What happens if I move out of DC during the year?
You owe DC income tax only on income earned while you were a DC resident. When you file, you will report your residency dates and calculate tax only on the portion of the year you lived in DC. You will also file a return in your new state for the months you lived there.
Can I deduct my DC income taxes on my federal return?
Yes, you can deduct DC income taxes paid as part of the state and local taxes (SALT) deduction on your federal return, up to $10,000 per year. This deduction is available if you itemize deductions rather than taking the standard deduction. Many filers find the standard deduction is larger, so they do not itemize.
Are there penalties for filing late or paying late?
Yes, DC charges penalties and interest on unpaid taxes. The penalty for filing late is usually 5 percent of the unpaid tax per month, up to 25 percent. Interest accrues daily on unpaid taxes. If you cannot pay by the important date, file your return on time anyway to reduce penalties, and set up a payment plan with DC.