Tax Credits for Working Families

District of Columbia

Earned Income Tax Credit^

Income Tax Rate: Graduated, 4-8.5 percent

State EITC: Yes

Refundable: Yes

Enacted: 2000

Eligibility: All filers who are eligible for the federal EITC are eligible for DC’s EITC. In addition, non-custodial parents between 18 and 30 “who are in compliance with a court order for child support payments” may claim DC’s credit even though they are not eligible for the federal credit.

Formula: 40 percent of the federal EITC

Notes/News: The DC EITC is the largest refundable EITC in the nation. The DC EITC was expanded from 35 percent to 40 percent in the 2008 budget bill. Roughly 46,300 taxpayers claim $30 million from the DC EITC. In February 2014, the DC council received the recommendations of its Tax Commission, including one to expand the EITC for childless workers.

The DC EITC Campaign is a partnership of the DC government, business and non-profit organizations to promote the free tax preparation and tax credits for working families. Approximately 50,000 DC households claimed the credit each year. Although these numbers are substantial and have grown since the Campaign was founded in 2000, the DC Fiscal Policy Institute estimates that there are still roughly 7,000-11,000 EITC-eligible DC residents who may not be claiming the federal or local credit, and an additional 3,600 who claim the federal credit, but not the local EITC. The Campaign is focused on outreach and free tax preparation assistance to ensure that all EITC-eligible DC residents claim the federal and DC credits. This includes extensive efforts to encourage community-based groups and religious congregations to do community outreach, and work with businesses to promote the EITC among their employees and customers.

On April 3,2014, Mayor Gray released his final budget,  which included the Tax Commission’s recommendations to increase the EITC for workers without custodial children from $195 to $487,  but only if revenues rise above current projections. In recent years, such contingent recommendations have not been funded.

In May, Council Chairman Phil Mendelson released a budget plan that would expand the district’s EITC for childless workers and increase the standard deduction for single and married residents to match federal levels. On May 28th, the Council passed this proposal and after some tax cuts were made subject to fiscal triggers, in a second vote on June 24th, the budget was passed. On July 11, the Mayor vetoed the budget, but on July 14, the council voted to override the budget. It now goes to Congress, which has 30 legislative days to override the budget. If they do not, the expansion of the EITC will go into effect January 1, 2015.

Reports/Materials: Bursting the Bubble, The Challenges of Working and Living in the National Capital Region, The Commonwealth Institute, DC Fiscal Policy Institute, Maryland Center on Economic Policy, June 2014

D.C. Council to Vote on Tax Reform Package Today, Joseph Henchman, Tax Foundation, June 2014

Here’s What the Experts are Saying about D.C.’s Tax Reform Proposal, Tax Foundation, June 2014

District of Columbia Shows How to Cut Taxes Responsibly, Michael Mitchell, The Center on Budget and Policy Priorities, June 2014

DC Tax Revision Commission Final Report, May 2014

District of Columbia Taxes from Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, Institute on Taxation and Economic Policy, January 2013

District of Columbia: State and Local Taxes in 2007, Institute on Taxation and Economic Policy, November 2009

DC’s Earned Income Tax Credit Supports Working Families Across the District, DC Fiscal Policy Institute, April 2008

Child Tax Credit^

State Credit: No

Child and Dependent Care Tax Credit^

State Credit: Yes

Refundable: No

Eligibility: Same as for federal credit

Formula: The credit is calculated as 32 percent of the federal child and dependent care credit, up to $336 for one child and $672 for two or more children..

Notes/News: In 2007, 15,916 DC filers claimed $3.7 million worth of child and dependent care credits. 65 percent of claimants earned less than $50,000. 2

Property Tax Circuit Breaker^

Circuit Breaker: Yes, known as the Homeowner and Renter Property Tax Credit

Refundable: Yes

Eligibility: The credit is available to homeowners and renters. Filers must have household income below $20,000, live in DC for the entire tax year, not be claimed as a dependent (unless the filer is over 65) and not live in public or tax-exempt housing. The rebate is provided as an income tax credit for filers or a rebate check for nonfilers.

Formula: The credit is calculated as a percentage by which property taxes exceed a certain percentage of household income. For renters, property taxes are calculated as 15 percent of rent paid. Filers who are over 62 or blind or disabled use a different formula.3

For most filers:

Household Income

Credit Amount

$0-$2,999

95 percent of property taxes exceeding 1.5 percent of household income

$3,000-$4,999

75 percent of property taxes exceeding 2 percent of household income

$5,000-$6,999

75 percent of property taxes exceeding 2.5 percent of household income

$7,000-$9,999

75 percent of property taxes exceeding 3 percent of household income

$10,000-$14,999

75 percent of property taxes exceeding 3.5 percent of household income

$15,000-$20,000

75 percent of property taxes exceeding 4 percent of household income

For filers who are over 62, blind, or disabled:

Household Income

Credit Amount

$0-$4,999

All property taxes exceeding 1 percent of household income

$5,000-$9,999

All property taxes exceeding 1.5 percent of household income

$10,000-$14,999

All property taxes exceeding 2 percent of household income

$15,000-$20,000

All property taxes exceeding 2.5 percent of household income

Notes/News: In tax year 2007, 7,589 filers claimed $4,023,000 worth of circuit breaker credits.4

In December 2012, the D.C. Council passed reforms to circuit breaker that strengthen the credit by raising the income eligibility from $20,000 to $50,000, increasing the maximum annual credit from $750 to $1,000, allowing renters to calculate the “property taxes” they paid as 20 percent of their rent rather than the current 15 percent, indexing the maximum credit amount of $1,000 and the eligibility income threshold of $50,000 for inflation, and expanding eligibility so that more than one taxpayer per household can apply (for example, roommates who rent in the same home). For these improvements to take effect, Mayor Gray or the D.C. Council must allocate funding to the credit in the FY 2014 budget.

Reports/Materials: District of Columbia Taxes from Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, Institute on Taxation and Economic Policy, January 2013

DC Homeowners’ Property Taxes Remain Lowest in the Region, Katie Kerstetter, DC Fiscal Policy Institute, February 2009

Improvements Needed in DC’s Schedule H Credit, Lindsay C. Clark, DC Fiscal Policy Institute, April 2008

1 District of Columbia Tax Expenditure Report, Office of Revenue Analysis, April 2010

2 District of Columbia Tax Expenditure Report, Office of Revenue Analysis, April 2010

3 DC Code §47-1806.6

4 District of Columbia Tax Expenditure Report, Office of Revenue Analysis, April 2010