District of Columbia Tax Changes Take Effect October 1, for Real Property, Individual Income and Franchise Taxes
The District of Columbia Office of Tax and Revenue (OTR) reminds taxpayers, tax professionals, software providers, businesses and others about tax changes that were enacted in the Fiscal Year 2023 Budget Support Emergency Amendment Act of 2022.
These tax changes will take effect October 1, 2022, unless otherwise noted, for the following tax types:
Real Property:
- Seniors and Individuals with Disabilities Real Property Tax Increase Limit Amendment Act of 2022: The senior citizen assessment cap credit limits taxable assessment increases to 2 percent, beginning with TY 2023 (the current taxable assessment increase limit is 5 percent). The increase in the amount of the benefit will be reflected beginning with the first half TY 2023 real property tax bill. It’s automatic for seniors/disabled individuals who are already receiving the tax benefit.
- Disabled Veterans Homestead Exemption Amendment Act of 2022: A $445,000 homestead deduction (deducted from the assessed value) has been established for individual real property owners who have a total and permanent disability resulting from a service-incurred condition or are paid at the 100 percent disability rating level as a result of unemployability. The benefit is subject to the Senior/Disabled Tax Relief household income threshold, currently $139,900 for TY 2022. The veteran must have obtained certification of eligibility from the DC Office of Veteran’s Affairs.
- Tax Abatements for Housing in Downtown Act of 2022: Tax abatements have been established for certain real property undergoing a change of use to provide at least ten housing units. For each property meeting the requirements, the real property tax shall be abated in an annual amount per residential square foot for a maximum of 20 years, subject to total program annual ceiling limits.
Individual Income:
- District Earned Income Tax Credit (EITC): For tax year 2022, the DC EITC percentage has been increased to 70 percent of the federal EIC. Individuals with qualifying children receiving the DC EITC will be paid differently than in the past. Taxpayers will receive a refund equal to 40 percent of their federal EIC as usual after their return is processed. The additional 30 percent of the DC EITC, however, will be paid in monthly installments over the 11 months pursuant to District law.
Additionally, 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 tax year 2023.
- New District of Columbia Tax Rate Schedule: For tax year 2022, the DC income tax rate schedule is:
| Not over $10,000 | 4% of taxable income |
| Over $10,000 but not over $40,000 | $400 plus 6% of the excess over $10,000 |
| Over $40,000 but not over $60,000 | $2,200 plus 6.5% of the excess over $40,000 |
| Over $60,000 but not over $250,000 | $3,500 plus 8.5% of the excess over $60,000 |
| Over $250,000 but not over $500,000 | $19,650 plus 9.25% of the excess over $250,000 |
| Over $500,000 but not over $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 $1M |
Corporation Franchise and Unincorporated Business:
- Cigarettes: The fixed tax remains $4.50 per package of 20 cigarettes. However, the surtax is increased from $.51 cents to $.52 cents per package of 20 cigarettes. As a result, the combined cigarette excise tax per package of 20 cigarettes is $5.02.
OTR will not administer a floor tax in connection with this increase in the cigarette tax, nor will the cigarette stamps currently in use be changed when the tax increases on October 1. Cigarette stamps purchased on or after October 1 will be sold at the new tax rate.
- Other Tobacco: The tax rate on other tobacco products is decreased from 80 percent of wholesale sales of other tobacco products to 79 percent of wholesale sales of other tobacco products. Additionally, the rate for little cigars remains at $.2510 per little cigar.
- Motor Fuel Tax: The motor fuel surcharge is increased from $.103 to $.107 per gallon on the sale of gasoline, gasohol, and other motor vehicle fuel. This surcharge is in addition to the $.235 tax on the sale of gasoline, gasohol and other motor vehicle fuel.
The following sources of income will be excluded from the computation of District gross income (retroactive to January 1, 2022, upon expiration of the Congressional review period for the Fiscal Year 2023 Budget Support Act of 2022):
- Cash assistance grants awarded by the Washington Convention and Sports Authority to excluded workers (extended through tax year ending December 31, 2023 only).
- The following grants awarded by the Deputy Mayor for Planning and Economic Development:
- Grants awarded to housing providers awarded under DC Code § 1-328.04(w); and
- Central Business District grants awarded under DC Code § 1-328.04(x).
- Funding received pursuant to 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).
Additional Resources:
- Fiscal Year 2023 Budget Support Emergency Act of 2022
- Fiscal Year 2023 Budget Support Act of 2022
- Chief Financial Officer, Office of the - Tax and Revenue, Office of - Notice of Increase in the Surtax on Cigarette Packages for Tax Year 2023
- Chief Financial Officer, Office of the - Tax and Revenue, Office of - Notice of Tax Rate on Other Tobacco Products for Tax Year 2023
- Chief Financial Officer, Office of the - Tax and Revenue, Office of - A Notice of Increase in the Local Transportation Surcharge on Motor Vehicle Fuels for Tax Year 2023
