District of Columbia Retirement
Even though Washington DC is not a state, its tax structure is similar to the rest of the US. Residents of the District of Columbia have to pay property, personal income, and sales taxes to the district government.
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Washington DC Income Taxes
The District of Columbia has a personal income tax similar to those in most states. The current Personal Income Tax rate in Washington DC is 4% for the first $10,000 of taxable income, $400 + 6% for $10,000-$40,000 of taxable income and $2,200 + 8.5% for taxable income over $40,000.
There is a $4,000 Standard Deduction for most residents of Washington D.C., effectively making the first $4,000 in income exempt from income tax. Persons who are married filing separately will only receive a $2,000 exemption.
The District of Columbia does not tax Social Security benefits. Most pension, IRA, and annuity income is taxed by the District. Every resident of the District can deduct $3,000 of pension, annuity, military retirement, and other retirement income from his or her district taxes. All other retirement income will be taxable in the district.
All persons who live in Washington DC for at least 183 days of a year are required to file a District income tax. This includes persons whose permanent residence is located outside the district. Any full time resident of Washington DC that has to file a Federal income tax return also has to file a District income tax return.
Washington DC Sales Tax
The District of Columbia charges a flat 6% Sales and Use Tax on most retail sales. Groceries, prescription drugs, nonprescription drugs, and utility services in residential homes are not covered by this tax. Soft drinks sold in retail stores are taxed at a rate of 6% in Washington DC. There is also a 10% sales tax on alcohol sold in liquor stores, a 10% tax on restaurant meals, and drinks and a 10% tax on car rentals in the District of Columbia.
Persons who buy items outside of Washington DC and do not pay sales tax in other jurisdictions could be subject to a use tax. The use tax rate is the same as the sales tax on the time purchased.
Washington DC Property Taxes
Residential property in Washington DC is currently taxed at a rate of 85ยข per $100 of assessed property value a year. That means the property taxes on a home worth $100,000 would be $850 a year in the District of Columbia.
The Washington DC offers several Property Tax Credits that can greatly reduce a homeowner's property tax bill.
The Homestead Deduction automatically takes $67,500 off of a home's assessed values for tax purposes. That would reduce the valuation of a $100,000 home to $32,500 and the tax bill to $277 a year.
The Senior Citizen Tax Credit can reduce a homeowner's property tax bill by 50%. To qualify for the Senior Citizen Tax Credit a person must own the home, be 65 years old or older, and have an income of less than $100,000 a year.
Persons who pay a private trash company to haul their garbagecan qualify for a Trash Credit in Washington DC. The current Trash Credit reduces a property tax liability by $96 a year.
| Capital: | D.C. |
| Cost of Living Rank: | NA |
| Sales Tax: | 6.0% |
| Income Tax: | 4.0% - 8.5% |
| State Website: | http://www.dc.gov |