Overview of District of Columbia Taxes
Washington, D.C. has relatively high income tax rates on a nationwide scale. The U.S. capital has a progressive income tax rate with six tax brackets ranging from 4.00% to 8.95%. Income tax brackets are the same regardless of filing status.
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- Our Tax Expert
Jennifer Mansfield, CPA Tax
Jennifer Mansfield, CPA, JD/LLM-Tax, is a Certified Public Accountant with more than 30 years of experience providing tax advice. SmartAsset’s tax expert has a degree in Accounting and Business/Management from the University of Wyoming, as well as both a Masters in Tax Laws and a Juris Doctorate from Georgetown University Law Center. Jennifer has mostly worked in public accounting firms, including Ernst & Young and Deloitte. She is passionate about helping provide people and businesses with valuable accounting and tax advice to allow them to prosper financially. Jennifer lives in Arizona and was recently named to the Greater Tucson Leadership Program.
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District of Columbia Paycheck Calculator
District of Columbia Paycheck Quick Facts
- D.C. income tax rate: 4.00% - 8.95%
- Median household income: $82,604 (U.S. Census Bureau)
How Your D.C. Paycheck Works
True to their unofficial motto of “Taxation Without Representation,” Washington, D.C. residents have to pay federal income taxes. These, along with FICA taxes and district taxes, are taken out of each and every paycheck. Federal and FICA taxes go to the IRS, with the former going toward your annual income taxes and the latter is put toward Medicare and Social Security. Your employer withholds 1.45% of your paycheck for Medicare and 6.2% for Social Security. (Your employer also matches those payments, so the total amount paid is technically double what you pay.)
How much gets withheld from your paychecks depends on several factors, such as the frequency of those paychecks, your marital status and how many jobs you have. If you are married, but you and spouse decide to file separately, that will affect your taxes. You’ll need to fill out a W-4 form every time you get a new job to help your employer determine how much should be taken out from each of your paychecks.
In December 2017, President Trump signed a new tax plan into law. The IRS has since released updated tax withholding guidelines. Taxpayers should have seen changes to their paychecks, to reflect the new tax plan, starting in February 2018. If you haven’t already, the start of the new year is a good time to check that the information on your W-4 is correct.
The IRS made revisions to the Form W-4 for 2020. The new form no longer requires you to list total allowances. Beyond this, it uses a five-step process that allows filers to enter personal information, claim dependents and indicate any additional income or jobs. These changes will mainly affect those adjusting their withholdings or changing jobs, though anyone hired before 2020 doesn't need to fill out the new form. The tax return you file in 2021 will account for any adjustments you’ve made to your withholdings in 2020.
You might get more or less taxes taken out of your paychecks if you opt to make any pre-tax contributions. For example, many salaried employees are eligible to put money into retirement accounts, like 401(k) plans, a health savings account, flexible spending account or other medical expense account. Money that you put in these accounts will come out of your paycheck even before income tax is removed.
Use the paycheck calculator to enter in different scenarios and see which deductions will affect the taxes coming out of your paycheck.
Luckily for D.C. residents, income taxes are fairly straightforward. Whether filing separately or jointly, all residents pay the same tax rates based on the same income brackets. Filers get taxed 4.00% on their first $10,000 of taxable income; 6.00% on income between $10,000 and $40,000; 6.50% up to $60,000; 8.50% up to $350,000; 8.75% up to $1 million; and 8.95% for taxable income above $1 million.
Note that if you were only a part-time resident of D.C., (meaning you didn't live there the entire calendar year), you still have to file a D.C. tax return so long as you lived there for at least 183 days. However, income you made when you weren’t living in the capital doesn’t count toward district taxes.
If you are planning to purchase or refinance a home in the District, have a look at our Washington, D.C. mortgage guide. It breaks down important information about getting a mortgage in D.C.
A financial advisor in Washington, D.C. can help you understand how taxes fit into your overall financial goals. Financial advisors can also help with investing and financial plans, including retirement, homeownership, insurance and more, to make sure you are preparing for the future.
How You Can Affect Your D.C. Paycheck
If you want to tweak your paycheck, you can do so by using your W-4 form. If you ended up paying a lot of taxes in April and think that will happen again, you may want to adjust your paycheck by increasing your withholding.
You can also withhold additional money by asking your employer to take a dollar amount out of each paycheck. All you need to do is write down how much you want taken out on the appropriate line on the W-4. It might look like a smaller paycheck, but think of it as paying taxes upfront so you’re not caught paying a large sum all at once come tax season. You also run the risk of facing underpayment penalties if you severely underpay taxes throughout the year.
Another factor to consider is your pre-tax contributions. If your employer offers benefits like a health savings account or flexible spending account, you can lower your taxable income by putting money in those. Also consider sheltering more money in pre-tax retirement accounts like a 401(k) or 403(b) if your budget allows it. Because these contributions come out of your paycheck before taxes are taken out, they can help decrease how much you pay in taxes.
Most Paycheck Friendly Places
SmartAsset's interactive map highlights the most paycheck friendly counties across the country. Zoom between states and the national map to see data points for each region, or look specifically at one of the four factors driving our analysis: Semi-Monthly Paycheck, Purchasing Power, Unemployment Rate, and Income Growth.
Methodology Our study aims to find the most paycheck friendly places in the country. These are places in the country with favorable economic conditions where you get to keep more of the money you make. To find these places we considered four different factors: semi-monthly paycheck, purchasing power, unemployment rate and income growth.
First, we calculated the semi-monthly paycheck for a single individual with two personal allowances. We applied relevant deductions and exemptions before calculating income tax withholding. To better compare withholding across counties we assumed a $50,000 annual income. We then indexed the paycheck amount for each county to reflect the counties with the lowest withholding burden.
We then created a purchasing power index for each county. This reflects the counties with the highest ratio of household income to cost of living. We also created an unemployment rate index that shows the counties with the lowest unemployment. For income growth, we calculated the annual growth in median income over five years for each county and indexed the results.
Finally, we calculated the weighted average of the indices to yield an overall paycheck friendliness score. We used a one half weighting for semi-monthly paycheck and a one-sixth weighting for purchasing power, unemployment rate and income growth. We indexed the final number so higher values reflect the most paycheck friendly places.
Sources: SmartAsset, government websites, US Census Bureau 2017 5-Year American Community Survey, MIT Living Wage Study, Bureau of Labor Statistics
