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District of Columbia Tax Changes Take Effect October 1st

Wednesday, September 27, 2023

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 October 1, 2023.   These changes are pursuant to the Fiscal Year 2024 Budget Support Emergency Amendment Act of 2023 (and the Fiscal Year 2024 Budget Support Amendment Act of 2023), previously enacted legislation applicable on October 1, 2023, or other annual changes required by District law.   The following changes will take effect October 1, 2023, unless otherwise indicated:

Sales and Use Tax:

  • Tourism Recovery Tax Amendment Act of 2023: The sales and use tax rate 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 increased during the periods from April 1, 2023, through March 30, 2027. The total sales and use tax rates imposed on such gross receipts are increased from 14.95 percent to 15.95 percent.   (This change was previously enacted on an emergency and temporary basis in the Tourism Recovery Tax Emergency Amendment Act of 2022 and Tourism Recovery Tax Temporary Amendment Act of 2022.)

  • Subject to Appropriations Repeals and Modifications Amendment Act of 2023: The Street Vendor Advancement Amendment Act of 2023, in part, establishes an amnesty program for any person applying with the Department of Licensing and Consumer Protection (DCLP) to be a street vendor for certain liabilities owed the District including any minimum sales tax imposed under D.C. Code § 47- 2002.01 and any interest or penalty due thereon.  Taxpayers may participate in the amnesty program by filing an application with DCLP along with documentation verifying the amount of delinquent minimum sales tax owed to OTR.  DCLP will then certify to OTR whether the taxpayer is eligible for such an abatement and the amount to be abated.

  • Alcoholic Beverage and Cannabis Administration Dedicated Tax Adjustment Act of 2023: Sales tax revenue dedicated to the Reimbursable Detail Subsidy Program is limited to $1,070,000.

  • Dedicated Revenue Adjustments Amendment Act of 2023: The dedication of sales and use tax revenue to the Arts and Humanities Fund for fiscal years 2024-2027 is limited to either the lesser of 5% of undedicated sales tax revenue or 102% of the amount allocated to the Arts and Humanities Fund in the prior fiscal year. For fiscal year 2028, 5% of undedicated sales tax revenue is allocated to the Arts and Humanities Fund.

  • The revenue from sales tax collected on services for parking or storing vehicles or trailers dedicated to paying the District's annual operating subsidies to WMATA is capped for fiscal years 2024-2027 at 102% of the revenue dedicated for the prior fiscal year.

Sports Wagering Tax:

  • Dedicated Revenue Adjustments Amendment Act of 2023: The dedication to the Early Childhood Development Fund of revenue collected pursuant to the tax on sports wagering is repealed. 

Real Property Tax:

  • Tax Abatements For Affordable Housing in High-Need Areas Amendment Act of 2023: The law increases the real property tax abatement amount available beginning October 1, 2024 from $4MM to $5MM for tax year 2025, and subject to annual cost-of- living increases thereafter.

  • Housing in Downtown Abatement Amendment Act of 2023: The law significantly increases the amount of abatement available beginning October 1, 2027 to $41MM, and thereafter for tax year 2028, and subject to annual cost-of- living increases thereafter.  Also, the law institutes an 18% moderate income or 10% low-income affordability requirement for unit affordability.

  • Creative and Open Space Modernization Amendment Act of 2023:  The law changes the requirements to qualify for the real property or possessory interest tax rebate based on specified income-earning activities, including education and research, consulting services, communications and design, hospitality, tourism and entertainment, life sciences and health technology, and technology.

Commercial Recordation and Transfer Taxes:

Tax on Cigarettes and Other Tobacco Products:

Motor Fuel Tax:

Individual Income Tax:

  • Expansion of DC Earned Income Tax Credit (DC EITC) to ITIN Filers :  Beginning January 1, 2023 an individual who is a resident of the District but is not a citizen or resident alien of the United States, who would otherwise be allowed a federal earned income credit but for possessing a social security number, may claim the DC EITC by filing a DC return with an individual taxpayer identification number issued by the IRS to the individual, individual’s spouse, or any qualified child claimed on the return.   
  • DC EITC Monthly Payments :  For tax year 2023, if the amount of the DC earned income tax credit is $1200 or more, the entire amount of the credit allowed shall be paid to the individual in 12 equal monthly payments. If the amount of the DC EITC is less than $1200, the entire amount of the credit allowed shall be paid to the individual in one lump sum payment.

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