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District of Columbia · the return
How District of Columbia income tax works: federal AGI, DC’s own deduction, seven brackets to 10.75%
A walk through Form D-40 from the first line to the last: why it starts from federal adjusted gross income, the additions and the subtractions that matter, a standard deduction that is DC’s and not the federal one, brackets that are the same for a married couple as for a single filer, the credits, and how the money gets paid in. For anyone who lives in the District and files here.
By Charles Trautman, EA, editor
Need to Know Tax · written from DC Office of Tax and Revenue (OTR), Office of the Chief Financial Officer sources, November 3, 2026; updated November 12, 2026 after the election · not yet reviewed by a District of Columbia practitioner
The District of Columbia is a city that taxes like a high-tax state. Form D-40 starts from federal adjusted gross income, line 11 of Form 1040, adds a few items back, subtracts Social Security and a short list of others, and then takes off a standard deduction that is the District’s own figure, $15,000 single and $30,000 joint for 2025 with the 2026 amounts still to come, or itemized deductions if you itemized federally. What is left is taxed in seven brackets, 4% on the first $10,000, 6% to $40,000, 6.5% to $60,000, 8.5% to $250,000, 9.25% to $500,000, 9.75% to $1,000,000 and 10.75% above that. The brackets are the same for every filing status and are not indexed. There is no local income tax layered on top, because the District is the locality.
Two features do most of the work. First, because the return begins at AGI, everything the federal return does below that line is invisible unless the District chooses to let it in. For 2025 it did not: the federal deductions for tips, overtime, car-loan interest and the $6,000 senior deduction were refused. For 2026 through 2028 the Council reversed course in the Fiscal Year 2027 Budget Support Act (Law 26-189), and all four are allowed, though the Office of Tax and Revenue has not yet published the line on which they will be claimed. Second, the brackets do not widen for a married couple. Two spouses earning $75,000 each pay 8.5% on their top dollars as a couple, exactly as one person earning $150,000 would. The District offers a remedy, filing separately on the same return, and it is worth real money; see below.
Who files
You are a District resident if you were domiciled here at any time in the year, or if you kept a place of abode in the District for 183 days or more during the year even while domiciled somewhere else. A resident reports all income, wherever earned. The Office of Tax and Revenue (OTR) requires a return from any resident whose gross income reaches the standard deduction for their filing status, $15,000 single and $30,000 joint on the 2025 thresholds, and from anyone who kept a DC abode for 183 days regardless of income. Nonresidents do not file a DC income tax return at all. The Home Rule Act bars the District from taxing the income of people who live outside it, so a Maryland or Virginia commuter who works downtown owes DC nothing and files Form D-40B only to recover tax withheld by mistake. Part-year residents file the D-40 for the year of the move and subtract the income received while a nonresident. Both situations are covered in Moving to or from the District.
Filing status follows the federal return, with two District additions: registered domestic partners may file jointly, and a married couple or domestic partners may file “separately on the same return,” one form with two columns. That option exists because the brackets are not doubled for couples, and it is the single most useful thing on the form for a two-earner household.
Where it starts: federal AGI
Line 4 of the D-40 is federal adjusted gross income. Adjusted gross income is income after the adjustments on federal Schedule 1, IRA and HSA contributions, student loan interest, half of self-employment tax, but before the standard deduction and everything beneath it. So an above-the-line federal move flows straight through and cuts DC tax too. A below-the-line move, the federal standard deduction, itemized deductions, the qualified business income deduction, the Schedule 1-A deductions, reaches the District only if the D-40 has a line for it, and for most of them it does not.
Line 5 adds back any DC franchise tax deducted on a federal business schedule. Line 6 brings in the other additions from Schedule I, Calculation A. The ones a household meets are bonus depreciation and section 179 expensing above the District limit on a Schedule C, E or F, which the District has never followed; interest on other states’ municipal bonds, added back since 2025 while DC, WMATA and DC Water bonds stay exempt; gain deferred into a Qualified Opportunity Fund; and, for 2026, qualified small business stock gain excluded federally under the July 2025 expansion of section 1202. New for 2026, the federal charitable deduction for people who do not itemize, section 170(p), is added back as well; the District does not allow it.
The subtractions
Lines 8 through 14 take things out. The biggest for a retiree is Line 10. The biggest for most other people is the one that is not there: there is no line for pensions, IRAs or 401(k)s, which are taxed in full.
| Subtraction | Where | What comes off |
|---|---|---|
| Income received while a nonresident (part-year filers) | Line 8 | All of it |
| State and local income tax refunds taxed federally | Line 9 | All of it |
| Social Security and Tier 1 Railroad Retirement, the taxable portion | Line 10 | All of it, at any age and income |
| Income already taxed on a DC franchise or fiduciary return | Line 11 | All of it (replaced for 2026 by a credit for franchise tax paid; see credits) |
| DC and federal government survivor benefits | Line 12 | All of it (verify age test) |
| Unemployment compensation | Line 13 | All of it |
| Interest on U.S. Treasury obligations | Schedule I, Calc. B | All of it |
| DC College Savings Plan contributions | Schedule I, Calc. B | $4,000 per person, $8,000 joint when each spouse owns an account; excess carries forward five years |
| Disability income, SSA-certified, household AGI under $100,000 | Schedule I via Form D-2440 | Up to $10,000 |
| DC public school teachers: classroom materials; tuition and professional development | Schedule I, Calc. B | $500; $1,500 |
| Federal tips, overtime, car-loan interest and senior deductions, 2026–2028 | To be announced on the 2026 forms | The federal amount (verify) |
The 529 subtraction is for the District’s own plan, the DC College Savings Plan; contributions to another state’s plan do not qualify. The federal return never asks about 529 deposits, so this is the subtraction most often missed.
Line 7 minus the subtractions is DC adjusted gross income, Line 16. For a working household with no Social Security and no unemployment it equals federal AGI.
The deduction: DC’s own figure, and the same choice you made federally
Line 18 is the deduction, and here the District departs from the federal return in a way that catches software early in the season. For tax years 2025 through 2029 the District uses its own “basic standard deduction,” set by Law 26-189 at the pre-July-2025 federal amounts and indexed each year: $15,000 for single, married filing separately and dependent filers, $22,500 for head of household and $30,000 for joint filers and surviving spouses in 2025, plus $1,600 for each spouse who is 65 or older or blind, $2,000 if single or head of household. The 2026 figures are to come; they will be indexed from those numbers, not the federal $16,100, $24,150 and $32,200. There are no personal or dependent exemptions. The old exemption section of the code was formally repealed by the same law.
You must make the same choice as on your federal return. The 2025 D-40 booklet puts it flatly: you are not entitled to the standard deduction if you itemize federally, and if you itemized federally you itemize here. DC itemized deductions begin with federal Schedule A and change two things. State and local income taxes are removed entirely; the District does not allow a deduction for them, so the federal SALT cap is beside the point. Real estate taxes stay in, and the booklet says the federal $40,000 limitation does not apply. The result is then reduced by the “DC 5% limitation” for higher incomes, on Calculation F, with a threshold OTR describes as applying above $200,000 of DC AGI. A homeowner close to the federal line who itemizes on both returns can come out ahead of the standard deduction here even when the federal gain is small.
The rate
DC AGI minus the deduction is taxable income, Line 19, and the tax on Line 20 comes from one schedule that every filing status uses.
| Taxable income | Tax |
|---|---|
| Up to $10,000 | 4% |
| $10,000 to $40,000 | $400 plus 6% of the excess over $10,000 |
| $40,000 to $60,000 | $2,200 plus 6.5% of the excess over $40,000 |
| $60,000 to $250,000 | $3,500 plus 8.5% of the excess over $60,000 |
| $250,000 to $500,000 | $19,650 plus 9.25% of the excess over $250,000 |
| $500,000 to $1,000,000 | $42,775 plus 9.75% of the excess over $500,000 |
| Over $1,000,000 | $91,525 plus 10.75% of the excess over $1,000,000 |
The thresholds have not changed since 2022 and are not indexed. Capital gains, dividends, interest and gambling winnings are taxed at the same rates as wages; there is no preferential rate for gains.
Most working households land in the 8.5% bracket on their top dollars. A single filer with $90,000 of wages and the standard deduction has about $75,000 of taxable income and pays $4,775. A couple with the same $90,000 has $60,000 taxable and pays $3,500, right at the edge of the 8.5% bracket. Add a second income and the couple is paying 8.5% on every additional dollar, where two single people with the same wages would still have room in the 6% and 6.5% brackets.
That is what “separately on the same return” fixes. Each spouse’s own income goes in that spouse’s column with its own $15,000 deduction and its own run up the brackets. A couple with $200,000 of taxable income filing jointly owes $15,400; split $100,000 each, the two columns owe $6,900 apiece, $13,800 together, $1,600 less. Income has to be allocated to the spouse who earned it, joint items are divided, and some credits are figured on the combined figures (verify), so it is a calculation to run both ways rather than a reflex. For a two-earner household it is usually the right answer.
The credits
Nonrefundable credits come off on Lines 21 through 23 and cannot take the tax below zero. Refundable credits on Lines 27 through 30 are paid out even when they exceed the tax.
| Credit | Amount | Where, and limits |
|---|---|---|
| Child and dependent care | 32% of the federal credit | Line 21; nonrefundable |
| Income tax paid to another state | The other state’s tax, up to the DC tax on the same income | Schedule U; nonrefundable; income DC also taxes |
| Share of DC franchise tax paid by an unincorporated business or S corporation you own (new 2026) | Pro rata share of the tax paid | Schedule U; nonrefundable; replaces the Line 11 exclusion |
| DC earned income tax credit | 85% of the federal EITC for 2026–2028 | Line 27; refundable; ITIN filers qualify; 12 monthly payments if $1,200 or more |
| Homeowner and Renter Property Tax Credit (Schedule H) | Up to $1,425 for 2025; 2026 to come | Line 28; refundable; federal AGI under $66,000, or $90,000 at 70 and older (2025 limits) |
| Keep Child Care Affordable (Schedule ELC) | Up to $1,200 per child under 4 for 2025; 2026 to come | Schedule U; refundable; taxable income up to $180,100 (2025) |
| Alternative fuel vehicle conversion | 50% of cost, up to $19,000 (verify) | Schedule U; nonrefundable |
There is no District child tax credit for 2026: the $420 credit enacted in 2024 was repealed before it paid out, and the restoration written into a December 2025 temporary act did not carry into the FY2027 budget. The family credits are worked through in Credits and breaks for District families.
Line 25 is the one charge that is not a credit: the DC Health Care Shared Responsibility payment, $795 for 2025 (verify 2026), owed by residents without qualifying health coverage, figured on Schedule HSR.
Worked example: a family of four
Married, filing jointly, both under 65, two children ages 3 and 9. Wages of $88,000 after $5,000 of 401(k) deferrals, interest and dividends of $2,000. They take the federal standard deduction, so they take DC’s. They paid $6,000 to a licensed child development center for the 3-year-old, which produced a federal child and dependent care credit of $1,200. DC withholding of $3,400. The 2026 DC standard deduction is to come; the 2025 figure of $30,000 is used here.
| Federal AGI (D-40 Line 4) | $90,000 |
| Additions and subtractions | $0 |
| DC adjusted gross income (Line 16) | $90,000 |
| DC standard deduction, joint (2025 figure) | −$30,000 |
| DC taxable income (Line 19) | $60,000 |
| Tax: $400 + $1,800 + $1,300 | $3,500 |
| Child and dependent care credit, 32% of $1,200 | −$384 |
| Tax after nonrefundable credits (Line 24) | $3,116 |
| Keep Child Care Affordable credit, one child under 4 (2025 figure) | −$1,200 |
| Net DC tax | $1,916 |
| Withholding | −$3,400 |
| Refund | $1,484 |
The federal standard deduction of $32,200 played no part; DC’s own figure did. Filed separately on the same return with wages split $50,000 and $38,000 and the investment income divided, the two columns would owe $1,960 and $1,240, $3,200 together against $3,500 jointly, before the credits are allocated. Another $1,000 into a DC College Savings Plan account would cut the tax by $65; another $1,000 of wages instead of 401(k) deferral would raise it by $85.
Withholding and estimated payments
Wage withholding is figured from Form D-4, the District’s own allowance certificate. A nonresident working in the District gives the employer Form D-4A instead and nothing is withheld. Pension and IRA payers will withhold DC tax if you ask, and since that income is taxed in full here, asking is usually wise.
Anyone who expects to owe $100 or more after withholding and credits must make estimated payments, on Form D-40ES or through MyTax.DC.gov, due April 15, June 15, September 15 and January 15. The safe harbor is stricter than the federal one for most people: pay in at least 90% of this year’s tax or 110% of last year’s, through withholding and estimates, and there is no underpayment interest. The District has no 100% option; the 110% figure applies to everyone, not just higher earners. Payments over $5,000 per installment must be made electronically. Interest on an underpayment runs at 10% a year compounded daily and is figured on Form D-2210.
How to file
The D-40 is due April 15, 2027. Most returns go in electronically with the federal return; MyTax.DC.gov files the D-40, the estimated vouchers and the extension free, with some limits, and shows refund status. The District did not join IRS Direct File. OTR warns that returns selected for identity review can take up to eight weeks, and that a first-time direct deposit request may be converted to a paper check.
The extension is the trap. A federal Form 4868 does nothing here. The District needs its own Form FR-127 by April 15, 2027, with payment of the tax you expect to owe; it extends the filing date six months to October 15, 2027, and does not extend the time to pay. A further six months is available to someone living or traveling outside the United States, but only after the FR-127 is on file. If the IRS later changes your federal return, you must file an amended D-40 within 90 days of the notice.
What trips people up
- Software applying the federal standard deduction, $32,200 joint, instead of the District’s own indexed figure.
- Taking the DC standard deduction after itemizing federally, or the reverse.
- A pension or IRA treated as exempt. Only Social Security comes off; every other retirement dollar is taxed.
- A two-earner couple filing jointly without running the separate-on-the-same-return calculation.
- A DC College Savings Plan contribution nobody mentioned, because the federal return did not ask.
- Other states’ municipal bond interest left off Schedule I.
- A federal extension filed and the FR-127 forgotten.
- Estimated payments set to 100% of last year’s tax; the District’s safe harbor is 110%.
- A 2025 return that claimed the federal tips, overtime or senior deductions. The District refused them for 2025, and OTR notices are expected.
Behind the scenes: why the brackets never doubled, and why 2026 looks different from 2025
The District’s rate schedule was rebuilt in stages, with the 8.5% bracket pulled down to $60,000 and the 9.25%, 9.75% and 10.75% tiers added at the top for tax years beginning in 2022. Each time, the Council set one set of thresholds for every filing status. The “separately on the same return” option is the District’s long-standing answer to the marriage penalty that creates: rather than widen the brackets, it lets each spouse climb them alone on one piece of paper.
The 2026 conformity story is the other thing to understand. The District conforms to the Internal Revenue Code on a rolling basis, so the July 2025 federal law would have flowed through automatically. In December 2025 the Council decoupled from the new individual deductions and the larger standard deduction, retroactive to the start of 2025. Congress disapproved the temporary version of that act in February 2026 under its Home Rule Act review power; the District’s Attorney General ruled the disapproval untimely, and OTR’s revised 2025 booklet still disallows the deductions. Then the Fiscal Year 2027 Budget Support Act, effective October 2, 2026, conformed to the tips, overtime, car-loan and senior deductions for 2026 through 2028, while keeping the District’s own standard deduction through 2029 and trimming the EITC to 85% to pay for it. The 2026 D-40 is the first form to carry that compromise, and how it does so is the open question of the season.
What to bring
- Every W-2, 1099-R, SSA-1099 and 1099-INT/DIV, with the state breakdown of any municipal bond interest
- Dates of birth for both spouses; 65 adds to the DC standard deduction
- Your federal return as filed, since the itemize-or-not choice carries over
- Real estate tax bills if you itemize; the District allows them without the federal cap
- DC College Savings Plan contributions by anyone in the household
- Child care receipts from a licensed facility, with the provider’s license number, for Schedule ELC
- Rent paid during the year, or the property tax bill, for Schedule H
- DC estimated payments made, with dates, and any FR-127 payment
- If you moved or worked in another state: the dates, and income by period
- Any notice from the Office of Tax and Revenue
Questions people ask
I don’t owe federal tax on my overtime anymore. Do I owe DC?
For 2025, yes; the District refused the federal deduction. For 2026 through 2028 the District allows it under Law 26-189, but the deduction comes off below federal AGI and the D-40 starts at AGI, so it has to be claimed on a line OTR has not yet published. Watch the 2026 forms.
Is the DC standard deduction the same as the federal one?
No. For 2025 through 2029 the District uses its own figure, $15,000 single and $30,000 joint in 2025 and indexed from there, not the federal $16,100 and $32,200 for 2026. The 2026 DC amount is to come.
We both work. Should we file jointly?
Run it both ways. The brackets are the same for a couple as for one person, so two incomes stacked on one return reach 8.5% sooner than they would apart. Filing separately on the same return gives each spouse the brackets alone and often saves several hundred dollars or more.
Can I deduct my property taxes and mortgage interest?
Only if you itemized federally. If you did, the District takes your Schedule A, removes state and local income taxes, allows real estate taxes without the federal $40,000 cap, and reduces the total under the 5% limitation at higher incomes.
I live in Maryland and work in DC. Do I file a DC return?
No. The District cannot tax nonresidents. Give your employer Form D-4A so nothing is withheld, and if DC tax was withheld anyway, file Form D-40B to get it back.
Does the District tax capital gains at a lower rate?
No. Gains, dividends and interest are taxed at the same 4% to 10.75% rates as wages.
Start at AGI, use DC’s deduction, and run the two-column return
Get federal AGI right, match the itemizing choice, take Social Security off on Line 10, and for a two-earner couple compute the return both ways before you sign.
Written by Charles Trautman, EA, editor · Need to Know Tax, Lone Tree, Colorado
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Forms and official pages named in this article
- Form D-40, Individual Income Tax Return (2025), the line layout
- 2025 D-40 booklet (revised August 2026): standard deduction, itemizing rule, Schedule 1-A deductions, extension
- Schedule H, Homeowner and Renter Property Tax Credit (2025)
- Schedule ELC, Keep Child Care Affordable Tax Credit (2025)
- Form D-40B, Nonresident Request for Refund (2025)
- Form D-4A, Certificate of Nonresidence in the District of Columbia
- OTR: Individual income tax forms (D-40, Schedules I, S, U, H, ELC, N, HSR, D-2440, D-2210, FR-127, D-40ES)
Sources and where to check
- OTR: DC Individual and Fiduciary Income Tax Rates
- OTR: Notice of October 1, 2025 tax changes (Schedule H, ELC, shared responsibility, estate tax figures)
- OTR: Estimated tax requirement and underpayment interest
- OTR: Statutory residency FAQ (domicile and the 183-day test)
- OTR: Individual income tax filing FAQs (amended returns after an IRS change)