The District of Columbia for retirees: Social Security untaxed, everything else taxed in full

The District of Columbia is generous on one kind of retirement income and hard on all the rest. The taxable part of Social Security and Tier 1 Railroad Retirement comes off Form D-40 on Line 10, at any age and at any income. Nothing else does. A pension, a traditional IRA withdrawal, a 401(k) or 403(b) distribution, an annuity payment, a Roth conversion, federal civil service retirement, military retired pay: all of it stays in District income and is taxed from the first dollar above the standard deduction. The $3,000 exclusion for government pensions that older filers remember ended for tax years beginning in 2015, and nothing has replaced it. What the District offers seniors instead is an addition to its own standard deduction, conformity for 2026 through 2028 to the federal $6,000 senior deduction, a refundable property tax credit on Schedule H with a higher income limit at 70, and a 50% cut in the property tax bill for homeowners 65 and older under an income test.

The rates are the ones everyone pays: 4% on the first $10,000 of taxable income, 6% to $40,000, 6.5% to $60,000, 8.5% to $250,000 and higher above that, with the same thresholds for a married couple as for a single person. A retired couple with $70,000 of pension and IRA income on top of Social Security is in the 6.5% bracket; add a Roth conversion and they are at 8.5% quickly. The whole return is walked through in How District of Columbia income tax works. What follows is the part that changes at retirement.

What comes off, and what does not

The Line 10 subtraction is of the taxable amount from federal line 6b, not the gross benefit. If $30,600 of a $36,000 benefit is taxed federally, $30,600 is what comes off; the other $5,400 was never in AGI.

Because the District starts from federal AGI and has no retirement subtraction, the federal rules decide the District result. The taxable amount on each 1099-R is the District’s taxable amount. A qualified charitable distribution from an IRA, excluded federally for someone 70½ or older, is excluded here too, because it never reaches AGI; for a District retiree who gives to charity, the QCD is worth the full marginal rate, up to 8.5% or more, where a deductible gift is worth nothing unless the household itemizes on both returns. Net unrealized appreciation, ten-year averaging and the other federal lump-sum rules carry over the same way.

The standard deduction at 65, and the federal senior deduction

The District uses its own standard deduction for 2025 through 2029, not the federal one. For 2025 it was $15,000 single and $30,000 joint, plus an additional amount for each person 65 or older or blind: $1,600, or $2,000 for a single or head-of-household filer. The 2026 figures are to come; they are indexed from those amounts, and they are not the federal $16,100 and $32,200. You take the standard deduction here only if you took it federally.

The federal $6,000 deduction for people 65 and older, in effect for 2025 through 2028, is the piece that moved. For 2025 the District refused it. For 2026 through 2028 the Fiscal Year 2027 Budget Support Act (Law 26-189) conforms to it. The complication is mechanical: the federal deduction comes off below adjusted gross income, and the D-40 begins at AGI, so the District has to give it back as a subtraction somewhere on the 2026 D-40 or Schedule I. The Office of Tax and Revenue has not yet published the 2026 forms, so where that line sits, and whether the federal income phase-out ($75,000 single, $150,000 joint of modified AGI) is simply inherited, is to come. For a couple both 65 the deduction is $12,000, worth $720 to $1,020 of District tax at the 6% to 8.5% rates.

Roth conversions: a two-return calculation

A Roth conversion is taxable federally in the year of the conversion and, in the District, taxed again at the regular rates, because the converted amount is an IRA distribution inside federal AGI and nothing takes it out. There is no exclusion, no age test that helps and no preferential rate. A $50,000 conversion by a couple already in the 6% bracket climbs through the 6% and 6.5% brackets and into 8.5%, and costs about $3,300 of District tax on top of the federal bill. The money saved later, when the Roth pays out tax-free, is saved from both governments, so the arithmetic is the usual one, pay now at today’s combined rate or later at a future combined rate, with the District rate included on both sides.

Two District-specific points. First, the brackets are the same for a couple as for a single filer, so a married couple converting together reaches 8.5% at $60,000 of taxable income; filing separately on the same return, each spouse can run a conversion up the brackets alone, and a couple converting $80,000 split $40,000 each saves several hundred dollars against one $80,000 conversion on a joint return. Second, a conversion raises federal AGI, and federal AGI is what the District’s income tests look at: Schedule H ($66,000 under 70, $90,000 at 70 and over, for 2025) and the senior property tax relief ($159,750 for tax year 2025). A conversion that pushes the household over one of those lines costs the credit for that year as well as the tax. Someone planning to leave the District for a place that does not tax retirement income has the opposite incentive: convert after the move, not before.

Relief on the property tax bill

Because the income tax gives seniors so little, the District’s real help for older homeowners is on the real property tax bill, administered by OTR’s Real Property Tax Administration rather than through the D-40. Residential property is taxed at 0.85% of assessed value, and the figures below are the tax year 2025 amounts from OTR’s October 2025 notice; the tax year 2026 figures are to come.

The 50% senior cut is large. On a $750,000 house, the Homestead Deduction brings the taxable assessment to $660,150 and the bill to about $5,611 at 0.85%; the senior relief halves that to about $2,806. The income test counts federal AGI, which includes taxable Social Security and every retirement withdrawal.

Schedule H is the one piece of property tax relief that runs through the income tax, and renters qualify too: 20% of rent paid counts as property tax. It can be filed by itself by someone who does not otherwise have to file a D-40, which describes many retirees living on Social Security alone. The age-70 step in the income limit, from $66,000 to $90,000, is unusual and worth a calendar note: a couple who missed the credit at 68 may qualify at 70 with no change in income.

Withholding and estimated payments

Since pensions and IRA withdrawals are taxed in full, a District retiree needs District tax withheld on them or needs to make estimated payments. The requirement starts at $100 of expected tax after withholding and credits, with payments due April 15, June 15, September 15 and January 15 on Form D-40ES or through MyTax.DC.gov. The safe harbor is 90% of this year’s tax or 110% of last year’s; the District does not have the federal 100% option. A retiree whose only taxed income is a modest pension often finds that asking the pension payer to withhold a flat amount for the District is simpler than four vouchers. Underpayment interest runs at 10% compounded daily.

The estate tax

The District has an estate tax, with no inheritance tax and no gift tax. The exclusion is $4,988,400 for deaths in 2026, indexed each year, with graduated rates on the excess that top out at 16%. Form D-76 is due nine months after death. There is no portability of a deceased spouse’s unused exclusion, so a couple whose rowhouse and retirement accounts together approach $5 million should plan with that in mind; the federal exclusion of $15 million for 2026 is irrelevant to the District figure.