District of Columbia's Estate Tax Laws
NOTE: State and local laws change frequently and the following information may not reflect recent changes. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.
If you live in the District of Columbia, then you live in one of a handful of jurisdictions that still collect a local death tax. The estates of DC residents, as well as the estates of nonresidents who own real estate and/or tangible personal property located in DC, are subject to a local death tax under the following guidelines.
When Is an Estate Subject to the DC Estate Tax?
For DC residents, an estate may be subject to the DC estate tax if the total gross estate exceeds $1,000,000.
For nonresidents of DC, an estate may be subject to the DC estate tax if it includes real estate and/or tangible personal property having a situs within the District of Columbia and the gross estate exceeds $1,000,000.
What DC Estate Tax Forms Must Be Filed?
If the estate is not passing to a surviving spouse or being donated to charity and the estate is subject to the DC estate tax, then the estate representative must file a DC Estate Tax Return called Form D-76.
If the estate is passing to a surviving spouse or being donated to charity and the estate is subject to the DC estate tax, then the estate representative must file a DC Estate Tax Return called Form D-76EZ.
The following documents should be attached to DC Form D-76 or DC Form D-76EZ, if applicable:
- A copy of Form FR-77 (Extension of Time to File DC Estate Tax Return)
- A copy of the Letters of Administration
- A copy of the Power of Attorney
- A copy of the decedent's Last Will and Testament
- A complete copy of IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, including all attachments, if the estate is required to file IRS Form 706; OR, a current copy of pages 1-3 of IRS Form 706, if the estate is not required to IRS Form 706
- A copy of all certified appraisals of the decedent's property
- A copy of the Death Certificate
Note that as indicated above, a DC Estate Tax Return may be required to be filed even if a federal estate tax return, IRS Form 706, is not required to be filed. In addition, even if the estate will not be required to file IRS Form 706, if a DC Estate Tax Return is required to be filed, then pages 1 - 3 of IRS Form 706 need to be prepared and filed with the DC Estate Tax Return.
Are Transfers to a Surviving Spouse Taxable?
Outright transfers to a surviving spouse are not taxable. For married couples who have used AB Trust planning to reduce their federal estate tax bill, a DC death tax may be due on the B Trust after the first spouse's death due to the gap of $4,250,000 between the DC exemption of $1,000,000 and the federal exemption of $5,250,000. While some states allow a married decedent's estate to make an election to treat a trust of which the surviving spouse is the sole beneficiary as "qualified terminable interest property" ("QTIP" for short) for purposes of calculating the local estate tax, DC law does not specifically allow for this, although some practitioners have been able to do this. Thus, married DC residents should consult with a DC estate planning attorney to determine if they should incorporate ABC Trust planning into their estate plan.
When Are the DC Estate Tax Return and Tax Payment Due?
The DC estate tax return must be filed, and any estate tax due must be paid, within 10 months after the decedent's date of death.
A six-month extension of time to file the DC estate tax return and related forms and pay any tax due may be requested; however, this will not extend the time to pay the tax, and interest will accrue during the extension period. Interest is charged at the rate of 10% per year, compounded daily and without regard to any extension.
All extension requests must be requested using DC Form FR-77; IRS Form 4768 will not be accepted.
Where Are the DC Estate Tax Return Filed and Tax Payment Made?
Mail returns and payments to:
Office of Tax and Revenue
Estate Tax Unit
P.O. Box 556
Washington, DC, 20044-0556
Checks should be made payable to the "DC Treasurer."
How Is the DC Estate Tax Calculated?
The DC estate tax rate is a progressive tax that maxes out at 16% for estates valued at $10,040,000 or more. Use the Estate Tax Computation Worksheet to calculate the tax due.
Where Can I Find Additional Information About DC Estate Taxes?
The DC Office of Tax and Revenue's Estate, Fiduciary, and Inheritance Taxes Frequently Asked Questions provides more information regarding DC estate taxes.
Does DC Collect an Inheritance Tax?
Does the District of Columbia currently collect a local inheritance tax, which is a tax assessed against the share received by each individual beneficiary of an estate as opposed to an estate tax, which is assessed against the entire estate? The answer to this question is No, the District of Columbia inheritance tax was repealed effective for deaths occurring on or after April 1, 1987.