The District of Columbia taxes like a state, a city and a county all at once, and because so many people live in Maryland or Virginia and work in DC, its rules often decide whether a person owes tax to two jurisdictions. DC has a graduated income tax with seven brackets, a franchise tax that applies to partnerships and sole proprietors as well as corporations, a sales tax that stays at 6 percent for now, and a paid family leave program funded by an employer tax. This page explains the pieces for residents, commuters and business owners. We serve DC-area clients remotely from our Naperville, Illinois office.
Individual income tax
Under the Office of Tax and Revenue (OTR), a person who is domiciled in DC at any time in the year, or who maintains an abode in DC for 183 or more days, is taxed on taxable income at these rates for tax years beginning after 2021:
| Taxable income | Tax |
|---|---|
| Up to $10,000 | 4% |
| $10,000 to $40,000 | $400 plus 6% of the excess |
| $40,000 to $60,000 | $2,200 plus 6.5% of the excess |
| $60,000 to $250,000 | $3,500 plus 8.5% of the excess |
| $250,000 to $500,000 | $19,650 plus 9.25% of the excess |
| $500,000 to $1,000,000 | $42,775 plus 9.75% of the excess |
| Over $1,000,000 | $91,525 plus 10.75% of the excess |
Residents file Form D-40 on MyTax.DC.gov. A resident who works in Maryland or Virginia still files a DC return, because DC taxes residents on their income wherever earned. A part-year resident also files Form D-40. If you do not live in DC and your employer withheld DC income tax by mistake, you file Form D-40B to request a refund. Commuters and remote workers should compare with multi-state payroll rules and their home state.
One federal planning point: DC does not allow a deduction for state and local income taxes, though it allows a deduction for the full amount of state and local real estate taxes. The federal cap on the state and local tax deduction is covered in SALT deduction and property taxes.
Business taxes
DC's corporate franchise tax is 8.25 percent of net income reported on a combined basis. Corporations pay a minimum tax of $250 if DC gross receipts are $1 million or less and $1,000 if they are higher. The minimum applies even if the corporation's income is otherwise exempt.
The unincorporated business franchise tax surprises many owners of partnerships, LLCs taxed as partnerships and sole proprietorships. It applies to businesses with DC gross receipts of more than $12,000, at 8.25 percent, after a 30 percent salary allowance for owners and a $5,000 exemption. A business is exempt if more than 80 percent of gross income comes from personal services rendered by the members and capital is not a material income-producing factor. Like corporations, these businesses pay a minimum tax of $250 or $1,000 depending on DC gross receipts. Because rules for professional practices can turn on specific facts, the exemption deserves a careful review. See multi-state tax for how this fits a wider footprint.
DC also administers gross receipts taxes on specific industries, including telephone, electricity, natural gas, heating oil, cable and mobile service providers, filed monthly by the 20th day of each month.
Sales and use tax
OTR states that the increase in the general sales tax rate to 7 percent has been postponed, so the general rate remains 6 percent through September 30, 2027. DC applies sales and use tax to tangible personal property and certain services, and other categories have their own rates, so a restaurant, hotel or liquor retailer should check the specific rate. Our sales tax service can help sellers outside DC who deliver into the District.
Payroll in DC
- Withholding: DC income tax withholding is reported through MyTax.DC.gov. See state income tax withholding.
- Paid Family Leave: on July 1, 2024 the PFL tax rate rose from 0.26 percent to 0.75 percent of wages paid to each covered employee, and the 0.75 percent rate applies to every quarter of calendar year 2026. As of October 1, 2026, the maximum weekly benefit for all claim types is $1,100. See state paid family and medical leave.
- Unemployment insurance: administered by the Department of Employment Services; confirm the current taxable wage base and your assigned rate with that agency. See state unemployment insurance.
City, county and property tax
DC has no separate county or city layer, so the District sets all local taxes, including real property tax. Property is taxed by classification and rate per $100 of assessed value; residential Class 1A property is taxed at $0.85 per $100 and most commercial Class 2 property valued at $5 million or less at $1.65, with higher rates for more valuable commercial property, vacant and blighted property. OTR also administers tax relief programs, credits and deductions. Our Washington DC metro page covers the wider area, including the neighboring states of Maryland and Virginia.
How we can help
We prepare DC resident and part-year returns, review whether a business owes unincorporated business franchise tax, and handle DC payroll registration and paid leave reporting. If you receive a notice from OTR, see state tax notices and representation. Contact us to discuss; this page is general information.
Frequently asked questions
I live in DC and work in Virginia. Do I still file a DC return?
Yes. OTR says if you lived in DC you must file a DC return even if you worked in another state.
My DC employer withheld DC tax, but I live in Maryland. What do I do?
A nonresident whose employer withheld DC income tax files Form D-40B to request a refund of that withholding.
What is the DC unincorporated business franchise tax?
It is an 8.25 percent tax on the net income of unincorporated businesses with more than $12,000 of DC gross receipts, with a 30 percent owner salary allowance and a $5,000 exemption, and an exemption for qualifying personal-service businesses.
Who pays the DC Paid Family Leave tax?
Employers pay it, at 0.75 percent of wages paid to each covered employee.
Official sources
- DC Office of Tax and Revenue: Individual and fiduciary income tax rates
- DC Office of Tax and Revenue: Business franchise tax rates
- DC Office of Tax and Revenue: Individual filings FAQs
- DC Office of Tax and Revenue: Sales and use tax
- DC Office of Paid Family Leave: Tax rate change FAQ
This page is a plain-language summary. The official source controls if there is any difference.
General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.