District of Columbia tax changes take effect Oct. 1 for real estate, personal income and franchise taxes

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The District of Columbia’s Office of Tax and Revenue (OTR) reminds taxpayers, tax professionals, software vendors, businesses and others of the tax changes that were enacted into the Budget Support Act of 2022 emergency for fiscal year 2023.

These tax changes will come into effect on October 1, 2022, unless otherwise indicated, for the following types of taxes:

Real estate:

  • The Seniors and Persons with Disabilities Property Tax Increase Limit Act, 2022: The Senior Citizens Assessment Cap Credit limits taxable assessment increase to 2%, effective TY 2023 (current taxable assessment increase limit is 5%). The increase in the amount of the benefit will be reflected from the property tax bill of the first semester TY 2023. This is automatic for elderly/disabled people who already benefit from the tax benefit.
  • Disabled Veterans Homesteads Amendment Act 2022: A homestead deduction of $445,000 (deducted from assessed value) has been established for individual property owners who have a total and permanent disability resulting from a service-related condition or who are paid at the disability level 100% due to unemployability. Benefit is subject to household income threshold for Elderly/Disability Tax Relief, currently $139,900 for TY 2022. Veteran must have certification of eligibility from DC Veterans Affairs.
  • Inner City Housing Tax Abatement Act 2022: Tax allowances have been introduced for certain buildings undergoing a change of use to provide at least ten dwellings. For each qualifying property, property tax will be reduced by an annual amount per residential square foot for up to 20 years, subject to total annual program caps.

Individual income:

  • District Income Tax Credit (EITC): For the 2022 tax year, the DC EITC percentage has been increased to 70% of the Federal EIC. People with eligible children receiving the DC EITC will be paid differently than in the past. Taxpayers will receive a refund equal to 40% of their federal EIC as usual after their return has been processed. However, the additional 30% of the EITC DC will be paid in monthly installments over the 11 months in accordance with district law.

In addition, certain district residents who are not citizens or resident aliens of the United States and who are not eligible for the federal earned income tax credit will be eligible for a district EIC beginning in the year of taxation 2023.

  • New District of Columbia Tax Rate Schedule: For the 2022 tax year, the DC income tax rate schedule is:
No more than $10,000 4% of taxable income
More than $10,000 but not more than $40,000 $400 plus 6% of excess over $10,000
More than $40,000 but not more than $60,000 $2,200 plus 6.5% of excess over $40,000
More than $60,000 but not more than $250,000 $3,500 plus 8.5% of excess over $60,000
More than $250,000 but not more than $500,000 $19,650 plus 9.25% of excess over $250,000
More than $500,000 but not more than $1,000,000 $42,775 plus 9.75% of excess over $500,000
Over $1,000,000 $91,525 plus 10.75% of excess over $1 million

Corporate Franchise and Unincorporated Business:

  • cigarettes: The fixed tax remains at $4.50 per pack of 20 cigarettes. However, the surtax increases from $0.51 to $0.52 per pack of 20 cigarettes. Therefore, the combined excise tax on cigarettes per pack of 20 cigarettes is $5.02.
    OTR will not administer a tax floor as part of this cigarette tax increase, and the cigarette stamps currently in use will not change when the tax increases on October 1. Cigarette stamps purchased on or after October 1 will be sold at the new tax. assess.
  • Other Tobacco: The tax rate on other tobacco products is reduced from 80% of wholesale sales of other tobacco products to 79% of wholesale sales of other tobacco products. In addition, the price for little cigars remains at $0.2510 per little cigar.
  • Fuel tax: The fuel surtax is increased from $0.103 to $0.107 per gallon on the sale of gasoline, gasohol and other automotive fuels. This surtax is in addition to the $0.235 tax on the sale of gasoline, gasoline-alcohol and other fuels for motor vehicles.

The following sources of income will be excluded from the district’s gross income calculation (retroactive to January 1, 2022, when Congress’s review period of the Fiscal Year 2023 Budget Support Act of 2022 expires) :

  • Washington Convention and Sports Authority cash assistance grants to excluded workers (extended to tax year ending December 31, 2023 only).
  • The following subsidies granted by the deputy mayor in charge of planning and economic development:
    • Grants to Housing Providers Granted Under DC Code § 1-328.04(w); and
    • Central Business District grants awarded under DC Code § 1-328.04(x).
  • The following grants awarded by the Ministry of Energy and Environment:
    • Funding received through the Solar for All program established by DC Code § 8-1774.16; and
    • Sustainable Energy Trust Fund grants awarded pursuant to DC Code § 8-1774.10(c)(22).
  • Rebates issued by the mayor as part of the incentive program for automated external defibrillators.
  • Lump-sum payments received by individuals from the Early Educator Pay Equity Program pursuant to DC Code § 1-325.431(c)(1A).

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