If you are a District of Columbia resident and paid income tax to another state on income that is also taxed by DC, you may qualify for the DC Credit for Taxes Paid to Another State. This credit helps prevent the same income from being taxed twice and can reduce your DC tax liability.
What Is the DC Out-of-State Tax Credit?
The District of Columbia allows residents to claim a credit for income taxes that were:
- Legally imposed by another state,
- Actually paid to that state, and
- Assessed on income that is also included in the taxpayer's DC taxable income.
The credit is generally limited to the lesser of:
- The income tax paid to the other state on the double-taxed income, or
- The amount of DC tax attributable to that same income.
Who Qualifies for the Credit?
You may qualify if:
- You were a DC resident during the tax year.
- You filed a tax return with another state.
- The same income was taxed by both DC and the other state.
- The tax paid to the other state was an individual income tax.
You generally cannot claim this credit for:
- Local, city, or county income taxes.
- Franchise taxes, business taxes, occupation taxes, or similar taxes imposed by another jurisdiction.
- Taxes that were refunded or reimbursed.
How Our Tax Software Calculates the Credit
When you prepare both a:
- District of Columbia resident return, and
- Nonresident return for another state,
our software automatically calculates the DC Credit for Taxes Paid to Another State whenever possible.
In many cases, no additional entry is required because the software pulls the necessary information directly from your nonresident state return.
When Additional Information Is Required
Certain situations, such as part-year residency or unique filing circumstances, may require you to enter information manually in the Credit For Taxes Paid To Another State Entry screen.
The screen includes the following fields:
- Name of Other State - Select the state where you paid income tax.
- Adjusted Gross Income from Other State - Enter the portion of income taxed by that state that is also included in your DC return.
- Tax on Other State - Enter the income tax liability paid to that state on the income being claimed for the credit.
The software uses this information to determine the allowable credit under DC rules.
Example
Assume you:
- Lived in DC for the entire year.
- Worked in another state.
- Reported $20,000 of income to that state.
- Paid $800 of income tax to that state.
- Included the same $20,000 of income on your DC return.
You would select the other state and enter the applicable income and tax amounts. The software will calculate the allowable credit and apply any limitation required under DC law.
Program Entry
If you need to manually enter your information for the credit, go to:
- State
- Edit DC using the three dots
- Credits
- Credit for Taxes Paid to Another State
Frequently Asked Questions
Do I need to enter anything if I already created a nonresident return?
Usually no. Our software automatically calculates the credit when both the DC resident return and the applicable nonresident return are included in your account.
Can I claim a credit for local income taxes?
No. DC's credit generally applies only to individual income taxes paid to another state or qualifying jurisdiction, not city or county income taxes.
Can the credit exceed my DC tax on the same income?
No. The credit is limited and cannot exceed the portion of your DC tax attributable to the income taxed by the other state.