DC Tax Law Changes for 2011 and 2012

The SALT Shaker

DC tax law changes for 2011 and 2012

Businesses:

  • Mandatory unitary combined reporting effective for tax years beginning on or after December 31, 2010.
  • For tax year 2011 business franchise taxes apportionment is changed to property, payroll and double weighted sales, previously the law provided for equal weighted 3-factor formula.
  • Minimum tax increased to $250 for corporations with gross receipts under $1 million, increased to $1000 if gross receipts greater than $1 million.

 

Individuals:

  • An additional tax bracket of 8.95% for taxpayers with DC taxable income over $350,000 has been added, applies to estates and trusts also.
  • New limitations apply to itemized deductions for DC taxable income of $200,000; deductions are to be reduced by 5% of the amount over $200,000. This doesn’t include medical, investment interest or casualty losses.
  • Effective 01/01/12 employers are to remove standard deduction from withholding calculation.
  • DC has repealed its exemption for the interest on out of state tax exempt bonds, effective for bonds acquired after 12/31/11. Except for bonds issued by the District of Columbia or the Metropolitan Washington Regional Airport Authority, income from state or municipal bonds acquired on or after 1/1/12 is taxable for DC income tax purposes. State or municipal bond income is not taxable in DC if: They were acquired before 01/01/12 and exempt by federal law.
  • Effective 01/01/12 withholding of DC income taxes at the highest marginal rate from distributions from retirement accounts to DC residents if there is an IRS withholding requirement.
  • For both individuals and franchise taxes the safe harbor requirement has been increased to 110% for 2012.

 

Other:

  • Sales tax rate increase on parking from 12% to 18% and packaged good liquor from 9% to 10%.
  • Addition  of security services to the sales tax base.
  • The sales tax rate decrease scheduled for 10/01/12 has been cancelled.

Remember the DC individual income tax only applies to residents, non-resident individuals are not subject to the individual income tax.

Please contact Amanda Pippin if you have any question regarding DC tax law.

The SALT Shaker is prepared by Amanda Pippin

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