District of Columbia Tax Guide

Navigating the complexities of state taxes can be daunting, but understanding Washington D.C.'s tax landscape is essential for residents and newcomers alike.

In this guide, we'll explore key components of the District of Columbia tax system, from income and sales taxes to property taxes and retirement benefits.

District of Columbia tax: Overview

The District of Columbia offers a mix of tax pros and cons.

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Its progressive income tax system ramps up quickly, which can mean higher bills for some. However, retirees get a break since the District doesn't tax Social Security benefits.

D.C. also has one of the lowest sales tax rates in the country, which can help keep everyday spending in check.

On the downside, property taxes in the District can be steep, especially for those inheriting property. The city also has one of the more significant estate taxes, which can be a surprise for heirs.

Let’s take a closer look at what D.C.'s tax landscape means for current and future residents.

[Data for this state tax guide was gathered from a number of sources including the Census Bureau, the state’s government website, the Sales Tax Handbook, and the Tax Foundation. Property taxes are cited as a rate percentage rather than the assessed value.]

District of Columbia income tax

The District of Columbia has a graduated individual income tax rate that ranges from 4% to 10.75%, according to the Tax Foundation.

District of Columbia retirement taxes

District of Columbia taxes in retirement: Social Security retirement and Railroad Retirement benefits are tax-exempt in Washington D.C. However, military retirement pay is fully taxable.

Income Tax on Taxable Income: Low of 4% (on less than $10,000) and a high of 10.75% (on more than $1,000,000)

• Social Security: Not taxable
• Pensions: Taxable
• 401(k) and IRA Distributions: Taxable

District of Columbia sales tax

Washington, DC has a 6% city sales tax rate.

Source: Sales Tax Handbook

• Groceries: Exempt
• Prescription drugs: Exempt
• Clothing: Taxable

How much are property taxes in DC?

In the District of Columbia, the baseline residential property tax rate is 0.85% ($0.85 per $100 of assessed value). While the tax rate itself is relatively low, high home values mean overall tax bills can be substantial. Homeowners can lower their bills through two primary programs:

• Homestead Deduction: Primary residents can cut $91,950 off their home’s taxable assessed value for tax year 2026, saving roughly $781 annually while capping annual taxable assessment increases at 10%.
• Older Adult Tax Relief: Qualifying seniors receive a 50% discount on their property tax bill and an annual assessment increase cap of 2%.

District of Columbia Property Tax Breaks for Retirees

Homeowners of all ages might qualify for Washington, D.C.'s homestead exemption, but eligible homeowners age 65 and older might also be able to reduce their property tax by 50%.

Age & Ownership: You must be at least 65 years old and own at least 50% of the home as your primary residence.

Income Limit: Total combined 2024 household federal adjusted gross income (AGI) must be under $163,500.

(Homeowners can apply for both programs online at MyTax.DC.gov.)

Washington DC gas tax

Note: The base tax is 23.5 cents per gallon, plus the local transportation surcharge indexing for inflation, totaling 35.7 cents per gallon.

Source: Sales Tax Handbook

District of Columbia taxes on alcohol and tobacco

*The District of Columbia imposes a base cigarette tax of $4.50 plus an inflation-adjusted surtax of 36 cents.

Source: Sales Tax Handbook

Unlike everyday goods that face the general sales tax rate, alcohol in D.C. is taxed around 10% — whether ordered with dinner or bought off the shelf.

Source: Sales Tax Handbook

District of Columbia estate and inheritance taxes

For 2026, Washington, D.C. estates valued over $4,988,400 are subject to a city estate tax. Graduated rates range from 11.2% to 16%.

Related

• Taxes in Retirement: How All 50 States Tax Retirees
• Most Expensive States for Retired Military Service Members
• 10 States With the Lowest Sales Tax