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District of Columbia Taxes 2026: What You Need to Know

The District of Columbia has a progressive income tax system, with rates ranging from 4% to 10.75% based on income brackets.

In addition to income taxes, D.C. imposes property taxes, sales taxes, and various employer taxes. Residents and HR professionals should be aware of several 2026 updates, including changes to the sales tax timeline, unemployment insurance rates, Paid Family Leave contribution rates, and federal benefit limits that affect DC employees’ paychecks.

(Source: DC Office of Tax and Revenue)

Federal Tax Withholding in the District of Columbia

For 2026, federal tax withholding in the District of Columbia follows the same rules as all other U.S. jurisdictions, based on federal income tax rates and guidelines from the Internal Revenue Service. Here is a summary of how federal tax withholding works for 2026:

Income Tax Rates: Federal income tax is withheld based on taxable income and the 2026 federal tax brackets. The One Big Beautiful Bill Act, enacted in July 2025, made the seven federal tax rates permanent at 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The top rate of 37% applies to single filers earning over $640,600 and married filing jointly filers earning over $768,700. (Source: IRS)

Standard Deduction: For 2026, the federal standard deduction has increased to $16,100 for single filers and married individuals filing separately, $32,200 for married couples filing jointly, and $24,150 for heads of household. (Source: IRS Publication 505)

Filing Status: The amount withheld depends on the employee’s filing status (single, married filing jointly, head of household). Employees use IRS Form W-4 to inform their employer of their withholding preferences. Changes to dependents, additional income, and deductions affect withholding. (Source: IRS)

Social Security and Medicare Taxes: In addition to federal income tax, employers withhold Social Security at 6.2% on wages up to the 2026 wage base of $184,500, and Medicare at 1.45% with no wage base limit. An additional 0.9% Medicare surtax applies to wages over $200,000 per employee in a calendar year. (Source: IRS Topic 751) (Source: SSA)

Federal Withholding Tables: Employers use IRS Publication 15-T to calculate the exact amount of federal tax to withhold. These tables account for income, filing status, and any adjustments made by the employee on Form W-4. (Source: IRS Publication 15-T)

State and Local Tax Withholding in the District of Columbia

Tax Bracket Structure

The District of Columbia employs a progressive income tax system for individual taxpayers. The tax brackets apply uniformly to all filing statuses, including single filers, married filing jointly, married filing separately, and heads of household. DC’s brackets have not changed since 2022 and remain the same for tax year 2026.

Tax Bracket Structure

• The lowest bracket taxes the first $10,000 of taxable income at 4%.
• Income between $10,001 and $40,000 is taxed at 6%.
• Earnings from $40,001 to $60,000 face a 6.5% rate.
• Income from $60,001 to $250,000 is taxed at 8.5%.
• A 9.25% rate applies to income between $250,001 and $500,000.
• Income from $500,001 to $1,000,000 is taxed at 9.75%.
• The highest bracket taxes income over $1,000,000 at 10.75%.

(Source: DC Office of Tax and Revenue)

Withholding Process

Employees in DC use Form D-4, the Employee Withholding Allowance Certificate, to determine the amount of DC income tax withheld from each paycheck. This form allows employees to claim allowances and specify additional withholding.

Employees who are residents of Maryland, Virginia, or other reciprocal agreement states should submit Form D-4A (Certificate of Nonresidence) to their DC employer to avoid DC withholding on their wages. (Source: DC OTR)

FICA and State Insurance Taxes in the District of Columbia

Here is an overview of FICA and state insurance taxes in the District of Columbia for 2026:

Social Security Tax

Both employees and employers are required to contribute 6.2% of earnings toward Social Security. For 2026, this tax applies to wages up to the $184,500 wage base limit (up from $176,100 in 2025). The employer matches the employee’s 6.2% contribution, for a combined total of 12.4% per employee. Self-employed individuals pay the full 12.4% but can deduct half on their federal return. (Source: SSA) (Source: IRS Topic 751)

Medicare Tax

Medicare tax is levied at 1.45% on all earnings, with no wage limit, for both employees and employers. High-income employees face an additional 0.9% Medicare surtax on wages exceeding $200,000 for single filers ($250,000 for married filing jointly). This additional 0.9% is an employee-only obligation; employers do not match it, but employers are required to begin withholding it once they pay an employee more than $200,000 in wages during the calendar year. (Source: IRS Topic 751)

DC Unemployment Insurance (UI) Tax

Employers in DC are responsible for paying unemployment insurance tax to the Department of Employment Services (DOES). The UI tax applies to the first $9,000 of each employee’s wages per calendar year. For 2026, Table VI remains in effect to compute rates for experienced employers, with rates ranging from 1.9% to 7.4% (1.9% to 4.4% for positive-rated employers, and 6.2% to 7.4% for negative-rated employers). New employers are assigned a standard rate of 2.7% until they establish an experience rating. Employers are also subject to a 0.2% administrative assessment fee. (Source: DC DOES) (Source: DC DOES Employer Portal)

DC Paid Family Leave (PFL) Contribution

To fund the DC Paid Family Leave program, covered employers contribute 0.75% on all wages paid to covered employees for 2026. This rate is unchanged from 2025, when the Council approved an increase from the prior 0.26% rate. The PFL tax is 100% employer-funded and may not be deducted from an employee’s paycheck. Covered employees who spend more than 50% of their work time in DC are eligible for benefits. The program provides up to 12 weeks of parental, family, and medical leave, plus 2 weeks of prenatal leave, with benefits calculated as a percentage of the employee’s average weekly wage. (Source: DC DOES Office of Paid Family Leave) (Source: DC OCFO)

DC Disability Insurance

The District of Columbia does not mandate state-level disability insurance. However, employers have the option to offer private disability insurance as part of their employee benefits package.

Workers’ Compensation Insurance

Employers in DC are required to provide workers’ compensation coverage for on-the-job injuries. This insurance is purchased from private insurers, and the cost varies based on the industry and the employer’s claims history.

Pre-Tax Deductions (Medical Insurance, 401(k), etc.)

Here is an overview of the key pre-tax deductions available to DC employees in 2026:

Health Insurance Premiums

Employees can deduct their contributions to employer-sponsored health, dental, and vision insurance plans from their gross pay before taxes are calculated. This reduction in taxable income applies to federal income taxes, DC state income taxes, and FICA taxes.

Health Savings Accounts (HSA)

For those enrolled in qualifying high-deductible health plans (HDHPs), HSA contributions are pre-tax. In 2026, individuals can contribute up to $4,400 (up from $4,300 in 2025), while families can contribute up to $8,750 (up from $8,300 in 2025). Individuals aged 55 or older can make an additional $1,000 catch-up contribution. HSA funds grow tax-free and can be withdrawn tax-free for eligible medical expenses. (Source: IRS Notice 2025-67)

Health Flexible Spending Accounts (FSA)

Employees may contribute up to $3,400 in 2026 to healthcare FSAs on a pre-tax basis (up from $3,300 in 2025). These accounts typically have a “use-it-or-lose-it” rule. For plans that allow carryovers, employees can carry over up to $680 into the following year (up from $660 in 2025). (Source: IRS)

401(k), 403(b), and 457 Plans

Contributions to employer-sponsored retirement plans are pre-tax, reducing taxable income. In 2026, employees under age 50 can contribute up to $24,500 (up from $23,500 in 2025). Those aged 50 and older can contribute up to $24,500 plus a catch-up contribution of $8,000 (up from $7,500 in 2025), for a total of $32,500. Employees aged 60 to 63 have a higher SECURE 2.0 catch-up limit of $11,250. (Source: IRS)

Employer Matching

Employer contributions to retirement accounts are not included in the employee’s taxable income for federal or DC income taxes until withdrawal in retirement.

Commuter Benefits

DC has a commuter benefit requirement for employers with 20 or more employees. For 2026, the IRS has increased the monthly limit for pre-tax qualified transportation fringe benefits to $340 per month for transit passes and vanpooling, and $340 per month for qualified parking expenses (each up from $325 per month in 2025). These two limits are separate, meaning an employee who takes transit and also parks can receive up to $680 per month combined in pre-tax commuter benefits. These deductions reduce taxable income for federal, DC state, and FICA taxes. (Source: IRS)

Dependent Care Flexible Spending Account (DCFSA)

Employees can contribute up to $5,000 per household ($2,500 if married filing separately) to a DCFSA for qualified dependent care expenses. These contributions reduce federal and DC state taxable income but do not reduce FICA taxable income.

Life Insurance

Employer-sponsored group term life insurance coverage up to $50,000 is a pre-tax benefit. Any coverage exceeding $50,000 is treated as taxable income, known as “imputed income,” and must be included in the employee’s wages for federal and DC tax purposes.

Disability Insurance

Premiums for short-term and long-term disability insurance are generally paid with post-tax dollars if the employee pays for them. If the employer covers these benefits, the benefits received may be treated as taxable income when paid to the employee.

Pre-Tax Deduction Summary for DC Employees in 2026

Pre-tax deductions generally reduce an employee’s taxable income for both federal income taxes and DC state income taxes. Many deductions also reduce income subject to Social Security and Medicare taxes, with some exceptions like DCFSA contributions.

Health insurance premiums for medical, dental, and vision coverage are fully deductible on a pre-tax basis. HSA contributions are limited to $4,400 for individuals or $8,750 for families. Retirement plan contributions are capped at $24,500 for those under 50, or $32,500 for those aged 50 and older (including the $8,000 catch-up). Commuter benefits allow up to $340 monthly for transit and a separate $340 monthly for parking. DCFSA contributions are limited to $5,000 per household.

These pre-tax deductions offer DC employees meaningful tax savings throughout the year on both their federal and DC income tax returns. It is important for HR professionals to review specific plan offerings and communicate these limits to employees during open enrollment.

Tax Brackets in the District of Columbia for 2026

Here is a comprehensive list of the 2026 Washington, DC income tax brackets. DC uses a progressive tax system where different portions of income are taxed at different rates. Importantly, DC does not adjust its income tax brackets for inflation, meaning the brackets have remained the same since 2022. The brackets apply uniformly across all filing statuses (individual filers, married filing jointly, married filing separately, and heads of household).

Source: DC Office of Tax and Revenue, Individual and Fiduciary Income Tax Rates

Additional Notes:

The tax brackets apply uniformly across filing statuses, and DC does not provide wider brackets for married filers as some states do. DC’s income tax structure is more progressive than many states, with seven brackets and a top rate of 10.75% on income over $1 million. The Tax Foundation ranks DC 48th on its 2026 State Tax Competitiveness Index. (Source: Tax Foundation)

Because DC does not adjust brackets for inflation, employees whose wages increase over time may find more of their income pushed into higher brackets without any corresponding relief from bracket adjustments. HR professionals should communicate this to employees when discussing raises or salary reviews.

Key 2026 Updates from the DC Office of Tax and Revenue

The DC Office of Tax and Revenue issued its Notice of October 1, 2025 Tax Changes, which contains several updates relevant for HR professionals and employees in 2026. (Source: DC OTR)

Sales Tax Rate: The general sales tax rate on tangible personal property, digital goods, and taxable services will remain 6.0% through September 30, 2026. A previously scheduled increase was delayed. Beginning October 1, 2026, the general sales tax rate is scheduled to increase to 7.0%. HR and finance teams should plan for this change in the second half of 2026 when budgeting for business purchases and employee expense reimbursements.

DC Earned Income Tax Credit (EITC): DC’s EITC is set at 85% of the federal EITC for tax years 2025 through 2028. The planned increase to 100% of the federal credit has been postponed to tax years beginning after December 31, 2028. The federal EITC maximum for 2026 is $8,231 for qualifying taxpayers with three or more qualifying children. DC’s EITC mirrors this on the state return at 85%. (Source: DC OTR)

Schedule H Credit (Homeowner and Renter Property Tax Relief): For tax year 2025 (filed in 2026), the maximum Schedule H credit is increased to $1,425 and the income threshold amounts are increased to $66,000 for non-seniors and $90,000 for seniors. This credit helps lower-income DC homeowners and renters offset property tax burdens. (Source: DC OTR)

Keeping Child Care Affordable Tax Credit: For tax year 2025, the maximum credit amount is increased to $1,200 per eligible child, and the maximum eligible income amounts are increased to $180,100 for single, head of household, and joint tax filers, and to $90,000 for married filing separately filers. (Source: DC OTR)

Estate Tax Exclusion: For estates of decedents who die on or after January 1, 2026, and on or before December 31, 2026, the DC estate tax exclusion (zero bracket) amount is increased to $4,988,400. (Source: DC OTR)

Cigarette Tax: The total cigarette tax increased from $5.03 to $5.07 per package of 20 cigarettes, effective October 1, 2025. (Source: DC OTR)

Out-of-State Municipal Bond Interest: Beginning with tax year 2025 (income reported in 2026), interest earned on bonds issued by other states and their political subdivisions is now included in DC gross income and is taxable. Previously this interest was exempt. Interest on DC bonds, WMATA bonds, and DC Housing Finance Agency bonds remains exempt. (Source: DC OTR)

Wrapping It Up

The District of Columbia’s 2026 tax landscape reflects stability in income tax bracket rates but meaningful updates in employer obligations and federal benefit limits. For HR professionals, the key payroll compliance items for 2026 are the increased Social Security wage base of $184,500, the 0.75% DC Paid Family Leave employer contribution rate on all wages, the UI Tax Table VI rate schedule ranging from 1.9% to 7.4% on the first $9,000 of wages, and higher pre-tax benefit limits for 401(k) ($24,500), HSA ($4,400/$8,750), FSA ($3,400), and commuter benefits ($340/month). Employees should also be aware of the coming DC sales tax increase to 7.0% scheduled for October 1, 2026.

For the most current DC tax rates, forms, and guidance, visit the DC Office of Tax and Revenue at otr.cfo.dc.gov and the DC Department of Employment Services at does.dc.gov. For federal withholding updates, visit the IRS at irs.gov.