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District of Columbia  Taxes: 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 business taxes. Residents should be aware of unique credits and deductions that may apply, such as the D.C. Earned Income Tax Credit and property tax relief programs 

Federal Tax Withholding in in District of Columbia 

For 2024, federal tax withholding in the District of Columbia follows the same rules as other U.S. jurisdictions, based on federal income tax rates and guidelines. Here’s a summary of how federal tax withholding works: 

1. Income Tax Rates: Federal income tax is withheld based on your taxable income and the federal tax brackets for 2024. The brackets adjust annually for inflation, and the rates range from 10% to 37%, depending on your income level. 
2. Filing Status: The amount withheld depends on your filing status (e.g., single, married filing jointly, head of household). 
3. Form W-4: Employees fill out IRS Form W-4 to determine how much federal tax is withheld from their paychecks. Changes to dependents, additional income, and other deductions affect withholding. 
4. Social Security and Medicare Taxes: In addition to federal income tax, employers withhold Social Security (6.2% up to the wage base limit) and Medicare (1.45% with no wage base limit). 
5. Federal Withholding Table: Employers use IRS tax tables to calculate the exact amount of federal tax to withhold. These tables take into account the income, filing status, and any adjustments made by the employee. 

State and Local Tax withholding  in District of Columbia 

Tax Bracket Structure 

• District of Columbia (or Washington DC) employs a progressive income tax system for individual taxpayers. 

• The lowest bracket taxes the first $12,000 of taxable income at 4%. 

• Income between $12,000 and $60,000 is taxed at 6%. 

• Earnings from $60,000 to $250,000 face an 8.5% rate. 

• A 10.75% rate applies to income between $250,000 and $1 million. 

• The highest bracket taxes income over $1 million at 11%. 

Withholding Process 

• Employees use Form D-4 to determine state tax withholding amounts. 

• This form allows for adjustment of allowances and additional withholding specifications. 

FICA & State Insurance Taxes in District of Columbia 

Here’s an overview of FICA and state insurance taxes in district of Columbia: 

 Social Security Tax 

Both employees and employers are required to contribute 6.2% of earnings towards Social Security. This tax applies to wages up to the 2024 wage base limit of $168,600. 

 Medicare Tax 

Medicare tax is levied at a rate of 1.45% on all earnings, with no wage limit, for both employees and employers. High-income employees face an additional 0.9% Medicare tax, which is determined based on their filing status. 

 D.C. State Insurance Taxes 

 Unemployment Insurance (UI) Tax 

Employers in D.C. are responsible for paying unemployment insurance tax. The rate varies between 1.6% and 7.0% and is applied to the first $9,000 of each employee’s wages. New employers typically begin with a 2.7% rate until they establish an experience rating. 

 Paid Family Leave (PFL) Insurance 

To fund the D.C. Paid Family Leave program, employers contribute 0.62% on all wages. This tax supports paid family and medical leave benefits for employees in the district.  

 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 D.C. 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, 401K etc.,) 

 Here’s an overview of medical Insurance Deductions in Washington D.C: 

 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, state, and FICA taxes in D.C. 

 Health Savings Accounts (HSA) 

For those enrolled in high-deductible health plans, HSA contributions are pre-tax. In 2024, individuals can contribute up to $4,150, while families can contribute up to $8,300. People aged 55 or older can make an additional $1,000 catch-up contribution. 

 Flexible Spending Accounts (FSA) 

Employees may contribute up to $3,200 in 2024 to healthcare FSAs on a pre-tax basis. These accounts typically have a “use-it-or-lose-it” rule, with some exceptions for carryovers or grace periods. 

 Here’s an overview of retirement plan contributions in Washington D.C: 

 401(k), 403(b), and 457 Plans 

Contributions to these employer-sponsored retirement plans are pre-tax, reducing taxable income. In 2024, employees under 50 can contribute up to $23,000, while those 50 and older can contribute up to $30,500, including a $7,500 catch-up contribution. 

 Employer Matching 

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

 Commuter Benefits 

D.C. allows pre-tax deductions for qualified commuter expenses. In 2024, employees can deduct up to $300 per month for transit passes and up to $300 per month for parking expenses. These deductions reduce taxable income for federal, state, and FICA taxes. 

 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 deductions reduce federal and state taxable income but not FICA taxable income. 

 Life Insurance 

Employer-sponsored group term life insurance coverage up to $50,000 is considered a pre-tax benefit. Any coverage exceeding $50,000 is treated as taxable income. 

 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, they may be included as taxable income when benefits are received. 

 Retirement Health Savings Accounts (RHSA) 

Some employers offer RHSAs, which allow pre-tax contributions for future healthcare expenses in retirement. These contributions reduce current taxable income.  

Pre-Tax Deductions in District of Columbia 

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

1. Health insurance premiums for medical, dental, and vision coverage are deductible.
2. HSA contributions are limited to $4,150 for individuals or $8,300 for families.
3. Retirement plan contributions are capped at $23,000 for those under 50, or $30,500 for those 50 and older.
4. Commuter benefits allow up to $300 monthly for transit or parking expenses.
5. DCFSA contributions are limited to $5,000 per household.

These pre-tax deductions offer D.C. employees potential tax savings throughout the year. It’s important to review specific employer offerings, as benefit plans may vary. 

Tax Brackets in District of Columbia in 2024 

Here is a comprehensive list of the 2024 Washington, D.C. income tax brackets for various filing statuses (individuals, married filing jointly, and heads of households). Washington, D.C. uses a progressive tax system, where different portions of income are taxed at different rates. 

2024 Washington, D.C. Income Tax Brackets (Individual Filers, Married Filing Separately, Head of Household, and Married Filing Jointly): 

Additional Notes: 

• The tax brackets apply uniformly across filing statuses, except in cases of married filing separately, which would only apply to each spouse’s individual income. 

• D.C.’s income tax structure is more progressive than many states, with higher earners paying a greater percentage of their income in taxes. 

 Median household income in District of Columbia

As of 2024, the median household income in Washington, D.C., is approximately $111,000, according to recent data. This figure reflects an increase from the 2023 median income of around $105,700 and shows the continued growth in household earnings in the city. This income level positions Washington, D.C., well above the national median household income of approximately $74,606, highlighting the region’s relatively higher cost of living and economic conditions (Neilsberg)