District of ColumbiaB26-0458Council Period 26 (2025-2026)HouseWALLET

D.C. Income and Franchise Tax Conformity and Revision Temporary Amendment Act of 2025

Sponsored By: Phil Mendelson (Democratic)

Became Law

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Bill Overview

Analyzed Economic Effects

10 provisions identified: 5 benefits, 1 costs, 4 mixed.

Credit for child and dependent care

Beginning January 1, 2026, DC gives a nonrefundable credit equal to 24.25% of your federal child and dependent care credit. DC bases the amount on the credit allowed under federal law, even if you used none of it on your federal return. A related factor in this section changes from 85% to 100% starting January 1, 2025, which increases the value where that factor applies.

Full SALT deduction for DC taxes

For DC tax, you can deduct all state and local taxes that qualify under federal law. The federal SALT cap does not limit the DC deduction.

Refundable child tax credit starts 2026

Starting January 1, 2026, DC provides a refundable $1,000 credit per qualifying child. The credit is cut by $50 for each $1,000 (or part) your AGI exceeds $55,000 (single or head of household), $70,000 (joint or combined), or $35,000 (separate). After 2026, the per‑child amount is adjusted for inflation and rounded to the nearest $100. You must claim the child as a dependent on both returns and be a full‑year DC resident for the prior calendar year. The law also repeals three 2025 child tax credit acts and consolidates the rules here.

Teachers can deduct classroom costs

Classroom teachers in DC public or public charter schools can deduct up to $500 for supplies. They can also deduct up to $1,500 for postgraduate tuition, professional development, or licensing exam fees. You must have taught the whole year (or the whole prior year) and be approved by DCPS. You cannot deduct amounts already used in your federal AGI.

Extra depreciation for businesses and investors

Starting January 1, 2025, DC allows the special depreciation allowance under IRC §168(n). DC also allows a depreciation deduction for investors in shared equity financing agreements as provided in DC law. These deductions can lower taxable income for eligible businesses and investors.

New standard deduction and filing rules

For 2025, DC sets a basic standard deduction of $15,000 (single or separate), $22,500 (head of household), and $30,000 (joint/combined or surviving spouse). DC also adds the federal additional standard deduction on top of these amounts. Personal exemptions are repealed. If you take the federal standard deduction, you must take the DC standard deduction; if you itemize federally, you must itemize for DC. Itemized deductions are reduced by 5% of DC AGI over $200,000 ($100,000 if married filing separately). You must file a DC return if your gross income is at least your basic standard deduction. Trusts must file if they have $100 or more of gross income; estates must file if they have $1 or more.

Some DC tax deductions now disallowed

DC lists deductions you cannot use to cut your DC tax. Disallowed items include income and franchise taxes, certain S‑corp pass‑through deductions, qualified business income under §199A, business deductions beyond DC limits, qualified tips, qualified overtime pay, personal car loan interest, and any enhanced senior deduction named in the law.

New limits and breaks for Opportunity Funds

DC allows a capital gains deduction for investments in Qualified Opportunity Funds under DC rules. For amounts you invest after December 31, 2026, DC may deny the federal 10% basis step‑up and the 10‑year gain break unless the fund meets DC criteria. Starting January 1, 2027, DC applies its own conformity and any extra Council rules to decide which funds get DC tax benefits.

This tax law is temporary

The law takes effect after the Mayor approves it and after a 30‑day congressional review. It expires 225 days after it starts. Rules tied to specific tax years apply as stated while the law is in force.

CFO sets withholding; extra exemptions allowed

The Chief Financial Officer now runs DC withholding rules. The withholding formula references the highest DC tax rate instead of a fixed 5%. Employees can claim extra withholding exemptions equal to estimated itemized deductions divided by a CFO‑set number. Penalty interest now uses the rate in §47‑4201 instead of a fixed 1.5% per month.

Sponsors & Cosponsors

Sponsor

Phil Mendelson
Democratic • House

Cosponsors

There are no cosponsors for this bill.

Roll Call Votes

All Roll Calls

Yes: 26 • No: 0

House vote • 12/2/2025

Final Reading, CC

Yes: 13 • No: 0

House vote • 11/4/2025

First Reading