If you live outside the District but earn income connected to it, the DC nonresident tax return filing requirements come down to what kind of income you have. Wages from a DC job are exempt from DC tax under federal law, so most commuters owe nothing and file nothing with the District. But if you receive rental income from DC property, run a business with DC-sourced revenue, sell DC real estate at a gain, or hold an interest in a pass-through entity doing business in DC, you must file Form D-40 with the DC Office of Tax and Revenue (OTR) and pay tax at rates that top out at 10.75%.
Who Counts as a DC Nonresident
DC treats you as a resident if you were domiciled in the District at any point during the tax year, or if you kept a place of abode in DC for 183 days or more that year.1D.C. Law Library. DC Code 47-1801.04 – General Definitions Meet either test and you file a full-year resident D-40 reporting worldwide income. Everyone else is a nonresident, and the filing question turns entirely on the type of DC income received.
DC Wages Are Exempt for Nonresidents
Federal law prohibits the District from taxing the personal service income of people who are not DC residents. If you live in Virginia, Maryland, or anywhere else and commute in for a salaried job, DC cannot tax that pay.
If your employer withheld DC tax by mistake, file Form D-40B, the Nonresident Request for Refund, to recover it.2DC Office of Tax and Revenue. 2024 D-40B Nonresident Request for Refund To stop the withholding going forward, give your employer Form D-4A, Certificate of Nonresidence.3Office of Tax and Revenue (OTR), District of Columbia. Form D-4A Certificate of Nonresidence in the District of Columbia
The wage exemption does not extend to rental income, business income, or other non-wage income from DC sources. Being exempt from DC wage tax is not the same as being exempt from DC tax on everything.
Income That Requires a Nonresident D-40
If you have any non-wage income sourced to the District, you must file Form D-40 and pay DC tax on it. There is no minimum dollar threshold. The categories that catch nonresidents most often:
- Net rental income from real property located in DC, even if you manage it remotely and have never visited.
- Profits from an unincorporated business operating in DC or earning DC-sourced revenue.
- Capital gains from selling DC real estate.
- Your share of income from a partnership or S corporation doing business in DC.
The Separate Business Return
If you run a sole proprietorship, partnership, or LLC that does business in DC, the business itself may also owe the Unincorporated Business Franchise Tax on Form D-30. The franchise return is required when the business has gross income above $12,000; at or below that amount, the business files the D-30N affidavit instead and owes no franchise tax.4DC Office of Tax and Revenue. 2025 D-30N Affidavit of Gross Income The D-30 does not replace your personal D-40. Nonresidents with DC business income often owe both.
How DC Sources Your Income
Sourcing controls how much of your total income DC can reach.
Real property income follows the location of the property. Net rents from a DC building are entirely DC-sourced, and so is the gain when you sell it. No apportionment applies.
Business service income uses market-based sourcing: revenue is sourced to DC when the service is delivered to a location in the District.5D.C. Law Library. DC Code 47-1810.02 – Allocation and Apportionment of District and Non-District Income A consultant working from Baltimore for a DC client whose benefit is received in DC has DC-sourced revenue. Where the customer sits matters; where you sit does not.
One federal backstop protects out-of-state businesses with limited DC activity. Public Law 86-272 prevents DC from imposing a net income tax when your only activity in the District is soliciting orders for sales of tangible personal property, with orders approved and filled from outside DC.6Office of the Law Revision Counsel. 15 US Code 381 – Imposition of Net Income Tax The protection covers physical goods only, not services, digital products, or licensing, and it disappears once your DC footprint expands beyond solicitation.
DC Income Tax Rates
Nonresidents pay the same graduated rates residents pay, applied to DC-sourced taxable income:7DC Office of Tax and Revenue. DC Individual and Fiduciary Income Tax Rates
- Up to $10,000: 4%
- $10,001 to $40,000: 6%
- $40,001 to $60,000: 6.5%
- $60,001 to $250,000: 8.5%
- $250,001 to $500,000: 9.25%
- $500,001 to $1,000,000: 9.75%
- Over $1,000,000: 10.75%
A single rental property or modest business typically produces an effective rate in the 6% to 8.5% range. Selling a high-value DC property or booking a large pass-through gain can push you into the top brackets in a single year.
Maryland and Virginia Reciprocity
DC has reciprocity agreements with Maryland and Virginia covering wages and salaries. A Maryland or Virginia resident who works in DC owes wage tax only to their home state.8Virginia Department of Taxation. Reciprocity9Comptroller of Maryland. Maryland Income Tax Administrative Release No. 3 For most commuters, this means filing the home state return and nothing with DC.
Reciprocity stops at wages. Virginia’s tax department states plainly that the exemption “applies to individual income tax only, not to the District of Columbia Unincorporated Business Franchise Tax.”8Virginia Department of Taxation. Reciprocity Maryland and Virginia residents earning DC rental or business income still owe DC tax on that income.
Avoiding Double Tax on Non-Wage Income
Your home state taxes your worldwide income, so DC-sourced rental or business income can appear on two returns. The credit that prevents double taxation is claimed on the home state return, not on the D-40. File the DC return, pay DC on the DC-sourced income, then report that same income at home and claim a credit for the DC tax paid. The income ends up taxed once, at whichever jurisdiction’s rate is higher.
Filing Form D-40 as a Nonresident
Nonresidents use the same D-40 residents use, but must attach Schedule S. Schedule S is where you report federal adjusted gross income, identify the portion sourced to DC, and allocate deductions to that portion.
Nonresidents can claim the DC standard deduction. For the 2025 tax year the amounts are $15,000 for single filers and married filing separately, $22,500 for head of household, and $30,000 for married filing jointly. The figures are adjusted annually for cost of living, so verify the current year’s numbers in the D-40 instructions before filing. After deductions, the bracket rates above produce the tax, and any estimated payments made during the year are credited on the return.
How to File
You can file electronically at MyTax.DC.gov or through commercial tax software that supports DC returns.10DC Office of Tax and Revenue. Federal and State E-File Program (Modernized e-File) Paper filers mail the completed D-40 and Schedule S to the address listed in the form instructions. Electronic filing processes faster and produces fewer errors.
Estimated Tax Payments
If you expect to owe more than $100 in DC tax and your DC income is not subject to withholding, DC requires quarterly estimated payments.11DC Office of Tax and Revenue. Underpayment of Estimated Tax Interest Nonresident landlords and business owners almost always fall in this group, since no employer withholds on that income.
Payments are due April 15, June 15, September 15, and January 15 of the following year. Underpayment triggers interest. To stay safe, base quarterly payments on 100% of last year’s DC liability or 90% of the current year’s expected liability.
Deadlines, Extensions, and Penalties
The D-40 is due on the federal deadline, April 15 for calendar-year filers. To extend, file Form FR-127 by April 15 and get an automatic six months, moving the filing deadline to October 15.12Office of Tax and Revenue. Individual Income Tax Forms
An extension covers filing, not payment. You must estimate the tax and pay it by April 15 even if the finished return goes in later.13Office of the Chief Financial Officer, District of Columbia. 2025 FR-127F Extension of Time to File Any balance past April accrues penalties and interest.
Late filing or late payment carries a penalty of 5% to 25% of the unpaid tax, and interest compounds daily at an annual rate of 10%.14DC Office of Tax and Revenue. Notice of Delinquency (TDI) Pay by April even when the return itself is not ready.
Special Rules for Military, Retirees, and Members of Congress
Three federal carve-outs override the general rules for people who might otherwise assume they owe DC tax.
Service Members and Military Spouses
The Servicemembers Civil Relief Act lets active-duty members keep their tax domicile in their home state while stationed in DC. A service member domiciled in Texas but assigned to Joint Base Anacostia-Bolling owes DC nothing on military pay. The Military Spouses Residency Relief Act extends similar protection to spouses living in DC solely because of the service member’s orders; the spouse files D-4A with the DC employer to stop withholding. Both protections cover wages only. DC rental income or DC business income remains taxable.
Retirement Income
Federal law bars any state or the District from taxing the retirement income of nonresidents.15Office of the Law Revision Counsel. 4 USC 114 – Limitation on State Income Taxation of Certain Pension Income The protection covers distributions from 401(k) plans, traditional and Roth IRAs, 403(b) and 457 plans, government pensions, and military retired pay, among others. If you worked in DC for decades but now live in Florida, DC cannot tax your pension. To qualify, the distributions generally must be part of a series of substantially equal periodic payments over your life expectancy or over a period of at least 10 years.
Members of Congress
Members of Congress who maintain a DC residence for legislative sessions are not DC residents for income tax purposes if they represent a state other than DC. Their congressional salary is taxable only by the state they represent.16Office of the Law Revision Counsel. 4 US Code 113 – Residence of Members of Congress for State Income Tax Laws The rule does not reach DC’s nonvoting delegate, who represents the District itself.