Washington DC collects income tax, and it applies to residents and some nonresidents
Washington DC has a local income tax, not a state income tax — because DC is not a state. But the tax works much like a state income tax: it applies to wages, investment income, and business earnings. If you live in DC, you owe DC income tax on all income, regardless of where you earn it. If you work in DC but live elsewhere, you may owe DC tax on wages earned there, depending on your home jurisdiction's rules.
The DC tax rate is progressive, meaning it rises with income. As of 2024, rates range from 4% on the lowest bracket to 10.75% on income above a certain threshold (the exact threshold changes yearly with inflation adjustments). DC also taxes capital gains, dividends, and business income at the same rates as wages.
DC does not have a sales tax on groceries, but it does tax most other retail purchases at 6%. Property tax exists separately and is assessed by the DC Office of the Chief Financial Officer.
Key Takeaways
- DC residents owe local income tax on all income at rates from 4% to 10.75%, depending on income level.
- Nonresidents who work in DC may owe DC tax on wages earned there, though your home state may offer a credit to avoid double taxation.
- DC taxes capital gains, dividends, and self-employment income at the same rates as wages.
- DC offers a standard deduction and personal exemptions similar to federal tax rules, which reduce your taxable income.
- You file DC taxes using Form D-40 (resident return) or Form D-40NR (nonresident return) by April 15 each year.
How DC income tax brackets work and what income is taxed
DC uses the same income categories as federal tax law: wages, interest, dividends, capital gains, rental income, and self-employment income all count. The tax brackets adjust each year for inflation, so the exact dollar thresholds change. For 2024, the brackets begin at 4% and step up at several income levels, reaching 10.75% on the highest bracket.
You can reduce your taxable income using the DC standard deduction (which varies by filing status and age) or by itemizing deductions if that yields a larger reduction. DC also allows a personal exemption per dependent, though the amount is modest compared to the standard deduction.
Long-term capital gains — profits from selling assets held more than one year — are taxed at the same rates as ordinary income in DC, unlike the preferential federal rates. This is a key difference from federal tax planning and matters if you realize large gains in a given year.
Who must file a DC tax return
DC residents must file if their income exceeds the standard deduction for their filing status. A single resident with income above roughly $13,000 (2024 figure, subject to change) must file; the threshold is higher for married filers and heads of household.
Nonresidents who earned DC-source income must file Form D-40NR if that income exceeds the standard deduction. DC-source income means wages paid by a DC employer, self-employment income from a DC business, or rental income from DC property. Income earned outside DC does not trigger a nonresident filing requirement, even if you worked in DC part of the year.
Part-year residents — people who moved into or out of DC during the year — file Form D-40 and report only the income earned while a resident, using the resident tax rates.
Nonresident workers and the DC commuter tax
If you live in Maryland or Virginia and work in DC, you owe DC tax on your DC wages. The rate is the same as for residents. However, your home state may offer a credit for taxes paid to DC, so you do not pay the full rate twice. Maryland and Virginia both allow credits, though the mechanics differ.
Maryland residents can claim a credit for DC taxes paid, reducing their Maryland tax dollar-for-dollar (up to the Maryland tax owed on DC income). Virginia offers a similar credit. You claim these credits on your home state return, not on the DC form.
Some employers in DC offer a commuter tax benefit under federal Section 132 rules, allowing you to set aside pre-tax income for transit costs. This reduces your federal and DC taxable income but does not eliminate the DC tax itself.
DC standard deduction and personal exemptions
The DC standard deduction for 2024 is approximately $13,000 for single filers, $26,000 for married filing jointly, and $19,500 for heads of household (these amounts adjust yearly). If you are 65 or older, you receive an additional standard deduction amount. You can use the standard deduction or itemize deductions — whichever is larger — but not both.
DC allows a personal exemption of roughly $2,700 per dependent (2024 figure, adjusted annually). This exemption applies to yourself, your spouse (if filing jointly), and each dependent child or relative who meets IRS rules. The exemption reduces your taxable income further after you explore the standard deduction.
If you are claimed as a dependent on someone else's return, you cannot claim your own personal exemption. Nonresidents get the same standard deduction and exemptions as residents, calculated the same way.
Filing your DC return and payment important date
DC income tax returns are due by April 15, the same date as federal returns. You file Form D-40 (resident) or Form D-40NR (nonresident) with the DC Office of the Chief Financial Officer. You can file electronically through the DC tax portal or by mail.
If you owe tax, payment is due by April 15. If you have overpaid through withholding, you can claim a refund on your return. DC processes refunds within 30 to 60 days if you file electronically; paper returns take longer.
If you cannot file by April 15, you can request an automatic extension to October 15 by filing Form D-40-EXT. An extension gives you more time to file but does not extend the payment important date — tax owed is still due April 15, or you will owe penalties and interest.
How DC taxes compare to neighboring states
Maryland has a state income tax with rates from 2% to 5.75%, lower than DC's top rate. Virginia's top rate is 5.75%. Both states tax capital gains at the same rates as ordinary income, like DC does. Neither Maryland nor Virginia taxes groceries; DC does not either.
If you are deciding where to live or work, DC's 10.75% top rate is higher than Maryland or Virginia, but DC has no sales tax on groceries and offers a property tax homestead deduction that can reduce property tax significantly. The total tax burden depends on your income mix, where you own property, and your spending patterns.
Nonresidents working in DC but living in Maryland or Virginia pay DC tax on wages but can claim a credit on their home state return, so the effective rate is usually the higher of the two jurisdictions' rates, not the sum.
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. Your home state (Maryland or Virginia) allows a credit for DC taxes paid, so you do not pay both in full. Claim the credit on your home state return to avoid double taxation.
What is the DC income tax rate for 2024?
DC income tax ranges from 4% on the lowest bracket to 10.75% on the highest bracket. The exact income thresholds for each bracket adjust yearly for inflation. Check the DC Office of the Chief Financial Officer website for the current year's brackets.
Can I deduct federal income tax from my DC taxable income?
No. DC does not allow a deduction for federal income tax paid. You can itemize deductions (mortgage interest, property tax, charitable donations) if that exceeds your standard deduction, but federal tax is not deductible.
What happens if I move out of DC mid-year?
You are a part-year resident. File Form D-40 and report only income earned while you lived in DC. Use the resident tax rates for that income. Income earned after you moved out is not subject to DC tax (though your new state may tax it).
Is DC income tax withheld automatically from my paycheck?
If your employer is in DC, they should withhold DC tax from your paycheck based on the W-4 form you complete. If withholding is incorrect, you can adjust it by submitting a new W-4 to your employer, or you can settle the difference when you file your return.