The District does not tax capital gains at a special rate. A gain from stocks, a business or real estate sits inside your federal adjusted gross income, and the D.C. Office of Tax and Revenue (OTR) taxes it with your other income under one graduated schedule. That makes the top rate the number that matters for a large sale: a gain that pushes taxable income past $1,000,000 is taxed at 10.75% above that line.
This guide uses the OTR income tax rate page, the OTR 2025 D-40 booklet (the return filed in 2026), the OTR individual filing FAQs, four sections of the D.C. Code and two IRS pages, all read on 3 November 2026. The D-40 booklet is written for tax year 2025; the 2026 booklet was not yet published when we checked, so details marked 2025 should be re-read when it appears.
The OTR rate page says the taxable income of an individual who is domiciled in the District at any time during the tax year, or who maintains an abode in the District for 183 or more days during the year, is subject to tax at the rates below, and labels them as the rates for tax years beginning after 12/31/2021. The 2025 D-40 booklet repeats the same schedule. We found no later rate change in the pages we read, so we treat this as the schedule for 2026, but confirm it on the OTR page before you plan a large sale.
| If taxable income is | The tax is |
|---|---|
| Not over $10,000 | 4% of taxable income |
| Over $10,000 but not over $40,000 | $400, plus 6% of the excess over $10,000 |
| Over $40,000 but not over $60,000 | $2,200, plus 6.5% of the excess over $40,000 |
| Over $60,000 but not over $250,000 | $3,500, plus 8.5% of the excess over $60,000 |
| Over $250,000 but not over $500,000 | $19,650, plus 9.25% of the excess over $250,000 |
| Over $500,000 but not over $1,000,000 | $42,775, plus 9.75% of the excess above $500,000 |
| Over $1,000,000 | $91,525, plus 10.75% of the excess above $1,000,000 |
We found no lower rate for long-term gains on the OTR rate page or in the booklet's instructions. IRS Topic 409 says that if you hold an asset for more than one year before you dispose of it, the gain or loss is long-term, and that net short-term gains are taxed federally as ordinary income at graduated rates. For the District the holding period changes nothing that we could find: the gain is taxed as income either way.
The D-40 instructions for Line 4 say to enter federal adjusted gross income from the 1040, 1040-SR, 1040-NR or 1040-NR-EZ. The capital gain or loss line (Line c of the income schedule) says to enter the amount from your federal return, and it states that the maximum allowable annual capital loss claim is $3000 ($1500 if married or registered domestic partner filing separately). So a net gain flows in at its federal amount and a net loss can offset other income only up to that limit in the year. The booklet does not say what happens to a loss above the limit; check the federal carryover rules or ask OTR.
One District-specific rule applies to depreciated property: when you dispose of an asset that is not fully depreciated, the booklet says to compute the capital gain or loss reported on your federal return for the year of disposition excluding any bonus depreciation. That matters for business equipment and rental property, where the District basis can differ from the federal basis.
The booklet says the D.C. Council passed a law in November 2025 that limits which of the 2025 federal OBBBA tax changes apply to the District, and the booklet lists the federal changes the District does not recognise. One of them is excluding capital gains from the sale of small business stock. In the Schedule I instructions the booklet says capital gains on qualified small business stock are included in District gross income, so if you claimed the federal exclusion you add the gain back to your federal adjusted gross income on Schedule I. That booklet is for tax year 2025.
The legal footing has been disputed. Congress passed, and the President signed on 18 February 2026, a resolution (Public Law 119-78) disapproving D.C. Act 26-217, the D.C. temporary conformity act. On 24 February 2026 the D.C. Attorney General opined that the resolution did not change 2025 liabilities and that the temporary act remains in effect; the booklet we read follows the District's decoupling. For 2026 sales we could not confirm the rule: secondary reports (EY and the National Taxpayers Union) say the District's FY2027 budget laws limit the small business stock addback to tax year 2025, which would leave 2026 gains following the federal exclusion, but we could not read the bill text (B26-0724 and B26-0661), so treat that as unconfirmed and check with OTR before relying on either answer.
A second addition is for deferred gain. If you reported deferred capital gains on your federal return because of an investment in a Qualified Opportunity Fund, the Schedule I instructions say you must add back the amount of the deferment. We did not read how or when the District later treats the deferred gain, so ask OTR before relying on an opportunity fund for a District tax benefit.
D.C. has had special rules for Qualified High Technology Companies (QHTCs), but we found no current capital gains benefit for investors. In the D.C. Code, section 47-1817.07a, titled "Tax on capital gain from the sale or exchange of a Qualified High Technology Company investment", is marked [Repealed], and its history lists D.C. Law 25-217 of Sept. 18, 2024. Section 47-1817.07, on rollover of capital gain from qualified stock to other qualified stock, is also marked [Repealed]. OTR's QHTC page lists tax credits for qualifying wage and retraining costs and a reduction in real property tax for qualified leasehold improvements as the benefits; it does not list a capital gains exclusion. If you hold or sold shares in a high-technology company and expect a lower District rate, ask OTR for the current treatment first.
This table is our arithmetic using the rate schedule above, not an official calculation. It shows the District tax a gain adds when it sits on top of other taxable income, after the District standard deduction, credits and other adjustments, rounded to the nearest dollar. "Taxable income" here means the figure on which the schedule is applied.
| Other taxable income | Capital gain added | Tax before the gain | Tax with the gain | Tax added by the gain |
|---|---|---|---|---|
| $80,000 | $100,000 | $5,200 | $13,700 | $8,500 |
| $300,000 | $200,000 | $24,275 | $42,775 | $18,500 |
| $30,000 | $20,000 | $1,600 | $2,850 | $1,250 |
The first row shows the usual case: both amounts fall in the 8.5% bracket, so the $100,000 gain costs $8,500. In the second row the gain fills the 9.25% bracket exactly, so $200,000 costs $18,500. In the third row the gain spans the 6% and 6.5% brackets and costs $1,250, or 6.25% on average. Real returns differ because of credits, deductions and the Schedule I adjustments above.
The District taxes residents on their income and, by the D.C. Code definition, taxes a nonresident only on the portion of net income that is subject to tax under sections 47-1808.01 to 47-1808.06 of the Code. Those sections cover the unincorporated business tax. Section 47-1808.01 defines an unincorporated business to include a trade or business conducted by an individual, whether resident or nonresident, and excludes (for tax years after 2014) a business that arises solely from buying, holding or selling stocks, securities or commodities for the taxpayer's own account, with listed exceptions. Our reading is that a nonresident who simply sells shares or a fund for their own account has no District gross income tax on the gain, but we did not read the unincorporated business tax rules in full, and section 47-1806.01 carries temporary 2025-26 conformity amendments whose text we did not read, so a nonresident who runs a business or a trading operation in D.C. should ask OTR. For nonresidents with D.C. tax withheld, the booklet says to file Form D-40B, Nonresident Request for Refund.
Who is a resident matters more than where the asset sits. The booklet says an individual is domiciled in D.C. if their permanent home is in D.C., and a statutory resident is someone who maintained a place of abode in D.C. for an aggregate of 183 or more days during the taxable year. A statutory resident is treated as a full-year resident and must report their entire income for the year. The OTR FAQs say that if you lived in the District you must file a D.C. return even if you worked in another state, and part-year residents file Form D-40.
If another state also taxes the gain, the booklet allows a credit to D.C. domiciliaries for individual income tax paid to other states on income derived from that state, and says the credit is limited to the rate of tax charged in the District. A move into or out of D.C. in the year of a sale is where a part-year return and the credit both come into play.
The District's return starts from federal adjusted gross income, and we found no separate District home sale rule in the pages we read. IRS Topic 701 says you may qualify to exclude up to $250,000 of the gain on the sale of your main home from your income, or up to $500,000 if you file a joint return with your spouse. Because that excluded gain is not part of your federal adjusted gross income, we read the effect as leaving only the gain above the exclusion to be taxed by the District at the schedule above; OTR's pages that we read do not say this in so many words. For the federal test, see our home sale capital gains guide.
CountryTaxCalc.com is reader-supported. When you use our partner links, we may earn a commission at no cost to you. This helps us provide free tax calculators and comparison tools.Learn more about our affiliate partnerships
★ 4.8verified reviews · 3,758 reviews
Moving between states means a complex multi-state tax return. Taxhub matches you with a real CPA via video call — average cost $325. Rated 4.8★ by 3,700+ clients.
⚠ Not for simple single-state returns. Free filing is fine for straightforward W-2 situations.
Get Matched With a CPA →Interested in reaching this audience? Advertise on CountryTaxCalc →