Notice of Oct. 1, 2025 Tax Changes

Notice of Oct. 1, 2025, Tax Changes

The District of Columbia Office of Tax and Revenue (OTR) reminds taxpayers, tax professionals, software providers, businesses and others about tax changes that will take effect Oct. 1, 2025, or that have been adjusted for tax year 2025 and/or fiscal tax year 2026. These changes are pursuant to the Fiscal Year 2026 Budget Support Emergency Amendment Act of 2025 (Act 26-0146), and the Fiscal Year 2026 Budget Support Amendment Act of 2025 (Act 26-0148) and other annual changes.

The following changes will take effect Oct. 1, 2025, unless otherwise indicated:

Corporate Franchise Tax and Unincorporated Business Franchise Tax:

• FAS 109: The Financial Accounting Standards No. 109 (FAS 109) deduction for certain combined reporting filers has been deferred until tax years beginning after Dec. 31, 2029.
• Small Retailer Credit: For tax year 2025, the maximum amount of the credit is increased to $10,100 and the income threshold amount is increased to $3,041,000.

Individual Income Tax:

• Schedule H Credit: For tax year 2025, the maximum amount of the credit is increased to $1,425 and the income threshold amounts are increased to $66,000 for non-seniors and $90,000 for seniors.
• 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 separate tax filers.
• Child Tax Credit Amendment Act of 2025: The child tax credit was repealed effective Sept. 30, 2024.

Shared Responsibility Payment:

• For tax year 2025, the applicable dollar amount used to calculate the shared responsibility payment has been increased to $795.

Sales and Use Tax:

• Sales Tax Increase Delay Amendment Act of 2025: The general sales tax rate on the gross receipts from the sale of or charges for tangible personal property, digital goods and taxable services, will remain 6.0% through Sept. 30, 2026. The general sales tax rate will increase to 7.0% for periods beginning on and after Oct. 1, 2026.
• Hotel Surtax Amendment Act of 2025: The temporary increase in the sales and use tax rate of 15.95% on the gross receipts from the sale of or charges for any room or rooms, lodgings, or accommodations furnished to a transient by any hotel, inn, tourist camp, tourist cabin, or any other place in which rooms, lodgings, or accommodations are regularly furnished in the District is extended through Sept. 30, 2027.

• Commercial Bingo Amendment Act of 2025: Beginning Oct. 1, 2025, the gross receipts from the sale of or charges collected to play commercial bingo will be subject to District sales and use tax at the rate of 7.5%.

Ballpark Fee ("Sport Facilities Fee"):

• Ballpark Fee and Fund Amendment Act of 2025: As of Oct. 1, 2025, the "Ballpark Fee" is renamed the "Sports Facilities Fee."

Recordation Tax:

• For first-time homebuyers, the cap on the purchase price for a residential property eligible for the reduced rate of recordation tax is increased from $753,000 to $777,000 for tax year 2026 (beginning Oct. 1, 2025). The income ceilings for households of such properties are also increased. These changes will be reflected in the application form for tax year 2026.

Real Property Tax:

• Tax Year 2025 Homestead Deduction: $89,850
• Tax Year 2025 Trash Collection Credit: $133
• Tax Year 2025 Senior/Disabled Household Income Threshold: $159,750
• Tax Year 2026 Special Real Property Tax Rate: 23.4%

Cigarettes and Other Tobacco Tax:

• Cigarettes: The total cigarette tax is increased from $5.03 to $5.07 per package of 20 cigarettes.
• Other Tobacco: The tax rate on other tobacco products will be 64 percent of wholesale sales of other tobacco products. Additionally, the rate for little cigars will increase from $0.2515 to $0.2535 per little cigar.

Motor Fuel Tax:

• The motor fuel surcharge will decrease from $0.118 to $0.112 per gallon on the sale of gasoline, gasohol, and other motor vehicle fuel. This surcharge is in addition to the $0.235 tax on the sale of gasoline, gasohol and other motor vehicle fuel.

Estate Tax:

• For estates of decedents who die on or after Jan. 1, 2026, and on or before Dec. 31, 2026, the exclusion (zero bracket) amount is increased to $4,988,400.

For additional information, contact OTR's Customer Service Center at (202) 727-4TAX (4829).

Additional Resources:

• Fiscal Year 2026 Budget Support Emergency Act of 2025
• Fiscal Year 2026 Budget Support Act of 2024
• Chief Financial Officer, Office of the - Tax and Revenue, Office of - Notice of Increase in the Surtax on Cigarette Packages for Tax Year 2026
• Chief Financial Officer, Office of the - Tax and Revenue, Office of - Notice of Tax Rate on Other Tobacco Products for Tax Year 2026
• Chief Financial Officer, Office of the - Tax and Revenue, Office of - A Notice of Increase in the Local Transportation Surcharge on Motor Vehicle Fuels for Tax Year 2026
• Chief Financial Officer, Office of the - Tax and Revenue, Office of - Eligibility for the Reduced Recordation Tax Rate for First-Time Homebuyers in Tax Year 2026
• Chief Financial Officer, Office of the - Revenue Analysis, Office of - Notice of Increases in the Schedule H Maximum Credit and Income Thresholds for Tax Year 2025
• Chief Financial Officer, Office of the - Revenue Analysis, Office of - Notice of Increase in the Keep Child Care Affordable Tax Credit and Income Thresholds for Tax Year 2025
• Chief Financial Officer, Office of the - Revenue Analysis, Office of - Notice of Increase in the Applicable Dollar Amount for Computation of the District's Shared Responsibility Payment for Tax Year 2025
• Chief Financial Officer, Office of the - Tax and Revenue, Office of - A Notice Pertaining to the District of Columbia Estate Tax Return for a Decedent's Gross Estate When the Date of Death is On or After January 1, 2026
• Chief Financial Officer, Office of the - Revenue Analysis, Office of - Notice of Increase in the Small Retailer Property Tax Relief Credit for Tax Year 2025
• Chief Financial Officer, Office of the - Tax and Revenue, Office of - Eligibility for the Reduced Recordation Tax Rate for First-Time Homebuyers in Tax Year 2026
• Chief Financial Officer, Office of the - Revenue Analysis, Office of - Notice of Increases for the 2025 Homestead Deduction, Trash Collection Credit Amount and Senior Income Threshold
• Chief Financial Officer, Office of the - Revenue Analysis, Office of - Notice of Sum and Special Real Property Tax Rates for Tax Year 2026