Complete Guide to Washington D.C. LLC Taxes in 2025
Washington D.C. presents a unique tax environment for LLC owners. As a federal district rather than a state, D.C. has its own tax code that combines elements of both state and local taxation. The District imposes graduated income tax rates from 4% to 10.75%, a $300 biennial report fee, and an Unincorporated Business Franchise Tax (UB tax) of 9.975% on certain business income. This comprehensive guide covers every aspect of D.C. LLC taxation for 2025.
How Washington D.C. Taxes LLCs
D.C. treats LLCs as pass-through entities for income tax purposes, but with an important catch: D.C. imposes an Unincorporated Business Franchise Tax (UB tax) on unincorporated businesses, including LLCs, that have D.C.-sourced gross income exceeding $12,000. The UB tax rate is 9.975% of net income from D.C. business activity.
In addition to the UB tax at the entity level, LLC members also report their pass-through income on their personal D.C. income tax returns (Form D-40) and pay the individual income tax at graduated rates from 4% to 10.75%. Members receive a credit for UB tax paid by the entity, avoiding true double taxation.
For single-member LLCs, if the LLC is subject to UB tax, the owner files Form D-30 (UB franchise tax return) for the entity and Form D-40 for personal income. For multi-member LLCs, the LLC files Form D-65 (Partnership Return) along with Form D-30 if subject to UB tax.
Key Point: D.C.'s UB tax of 9.975% is one of the highest entity-level taxes on LLCs in the nation. While members get a credit against their personal D.C. income tax, the UB tax can exceed the personal tax credit, creating additional tax burden. This makes D.C. a relatively expensive jurisdiction for LLCs compared to neighboring Virginia and Maryland.
D.C. Income Tax Brackets for 2025
| Taxable Income | Tax Rate |
|---|---|
| $0 - $10,000 | 4% |
| $10,001 - $40,000 | 6% |
| $40,001 - $60,000 | 6.5% |
| $60,001 - $250,000 | 8.5% |
| $250,001 - $500,000 | 9.25% |
| $500,001 - $1,000,000 | 9.75% |
| Over $1,000,000 | 10.75% |
The Unincorporated Business Franchise Tax (UB Tax)
The UB tax is D.C.'s most significant tax for LLC owners. Key details:
- Rate: 9.975% of D.C.-sourced taxable income
- Threshold: Applies to unincorporated businesses with D.C. gross receipts exceeding $12,000
- Exemption: The first $5,000 of net income is exempt from UB tax
- Credit: LLC members receive a credit against their personal D.C. income tax for UB tax paid
- Filing: Form D-30 (Unincorporated Business Franchise Tax Return)
Certain professions are exempt from the UB tax, including licensed professionals whose income derives from personal services (doctors, lawyers, accountants, architects, and engineers operating as sole proprietors or single-member LLCs). However, once the business has employees other than the owner, or significant capital investment, the exemption may not apply.
D.C. Tax Summary
| Tax Component | Rate / Amount | Notes |
|---|---|---|
| Income Tax | 4-10.75% | Graduated brackets |
| UB Franchise Tax | 9.975% | On D.C. business income above $12K gross |
| Biennial Report | $300 | Due every 2 years on April 1 |
| Sales Tax | 6% | 10% on restaurants, 10.25% on hotels |
| Federal SE Tax | 15.3% | On 92.35% of net earnings |
Federal Taxes for D.C. LLC Owners
- Self-Employment Tax (15.3%): 12.4% Social Security (up to $176,100 in 2025) plus 2.9% Medicare on all earnings. Additional 0.9% Medicare surtax above $200,000 (single).
- Federal Income Tax (10%-37%): Taxed at applicable marginal rates.
- QBI Deduction: Up to 20% deduction on qualified business income.
Tax Tip: D.C. LLC owners should strongly consider S-Corporation election if income exceeds $50,000-$60,000. The S-Corp election can reduce SE tax significantly, and D.C. treats S-Corps favorably. However, note that the UB tax may still apply to S-Corps in some situations. Use our S-Corp Tax Calculator to compare.
D.C. Sales Tax for LLCs
D.C. imposes a 6% general sales tax on tangible personal property and certain services. Higher rates apply to specific categories: restaurant meals are taxed at 10%, hotel rooms at 10.25%, and parking at 18%. Certain items are exempt, including groceries, prescription drugs, and residential utilities.
D.C. LLC Filing Requirements
D.C. LLCs must file a Biennial Report with the D.C. Department of Consumer and Regulatory Affairs (DCRA, now DLCP) every two years. The fee is $300, and the report is due by April 1 of the applicable year. This biennial (not annual) schedule means you pay $150 effectively per year, though the lump sum payment is $300 every two years.
D.C. LLC Filing Deadlines
| Filing Type | Deadline | Extension |
|---|---|---|
| Personal Return (D-40) | April 15 | Yes, to October 15 |
| UB Tax (D-30) | April 15 | Yes, to October 15 |
| Partnership Return (D-65) | April 15 | Yes, to October 15 |
| Biennial Report | April 1 (every 2 years) | No extension |
| Estimated Payments | Apr 15, Jun 15, Sep 15, Jan 15 | No |
Estimated Tax Payments in D.C.
D.C. requires estimated tax payments for both the individual income tax and the UB franchise tax if you expect to owe $100 or more after credits and withholding. This extremely low threshold means virtually all LLC owners with D.C. income must make quarterly payments. Use Form D-40ES for individual estimated taxes and Form D-30ES for UB tax estimates.
D.C. LLC Formation Costs
- Articles of Organization: $99 filing fee online, $220 paper filing
- Registered Agent: Required; $50-$200/year for commercial service
- Biennial Report: $300 every two years (ongoing)
- EIN: Free from the IRS
- Clean Hands Certificate: May be required before registration; confirms no outstanding D.C. tax obligations
D.C. vs. Nearby Jurisdictions for LLC Taxes
| Jurisdiction | Income Tax Rate | Annual Fee | Business Tax |
|---|---|---|---|
| Washington D.C. | 4-10.75% | $300 biennial | UB tax 9.975% |
| Virginia | 2-5.75% | $50 | None (BPOL local) |
| Maryland | 2-5.75% + county | $300 | None |
| Delaware | 0-6.6% | $300 | None for LLCs |
D.C.'s combination of high income tax rates, the UB franchise tax, and the $300 biennial report makes it one of the more expensive jurisdictions for LLCs in the Mid-Atlantic region. Virginia offers significantly lower rates and fees. Maryland is competitive on income tax rates but has high county surcharges in some areas.
Common D.C. LLC Tax Mistakes
- Not knowing about the UB tax: Many LLC owners are surprised to learn D.C. imposes a 9.975% entity-level business tax on top of individual income tax.
- Missing the biennial report: The $300 report is due every two years, and missing it can result in LLC dissolution.
- Not making estimated payments: D.C.'s $100 threshold means nearly everyone must pay quarterly.
- Forgetting the UB tax professional exemption: Licensed professionals may be exempt -- don't pay the UB tax if you qualify for the exclusion.
- Not evaluating Virginia or Maryland formation: If you have flexibility on where to form your LLC, Virginia or Maryland may offer significant tax savings over D.C.
- Ignoring the Clean Hands requirement: D.C. requires a Clean Hands certificate for many government interactions, including renewing business licenses. Outstanding tax debts will block this.
Dissolving a D.C. LLC
To close a D.C. LLC, file Articles of Cancellation with the D.C. DLCP ($99 fee). Before filing, obtain a Clean Hands certificate confirming all tax obligations are met. File final federal and D.C. tax returns (including final D-30 UB return if applicable), settle all debts, and distribute remaining assets to members.