Updated October 8, 2026. Quick answer: Generally no, if you qualify for the federal exclusion. The District’s code says gross income “shall have the same meaning as defined in” section 61 of the Internal Revenue Code, which leaves out a gain excluded under section 121. Gain above it is taxed at graduated rates, “$91,525, plus 10.75% of the excess over $1,000,000” at the top, and the seller pays a deed transfer tax.
District of Columbia tax on home sale profit at a glance
| Item | What the documents say |
|---|---|
| Profit on your main home | Gross income has the same meaning as in section 61 of the Internal Revenue Code, which excludes a gain excluded under section 121 (the pages read do not mention section 121) |
| Rate on gain above the exclusion | Graduated: 4% up to 10.75% over $1,000,000, the same for all filers |
| Collected at the sale | Seller pays a deed transfer tax: 1.1% of consideration under $400,000, 1.45% of the entire amount at $400,000 or more; the Recorder of Deeds FAQ prints the same rates for a separate deed recordation tax, for which the parties to the deed are jointly and severally liable |
| Source | Council of the District of Columbia (code.dccouncil.gov); DC Office of Tax and Revenue, Recorder of Deeds; DC Office of Tax and Revenue; Council of the District of Columbia |
What the District of Columbia documents say
DC Code section 47-1803.02(a) says the words gross income “shall have the same meaning as defined in” section 61 of the Internal Revenue Code of 1986, and subsection (b) defines adjusted gross income by reference to the Code. Under the federal statute, “Gross income shall not include gain from the sale or exchange” of a principal residence that meets the ownership and use tests, so an excluded gain never enters federal adjusted gross income. That is reasoning from two documents. The District pages read never name section 121.
Section 47-1806.03 sets the rates. The 2025 D-40 booklet prints the schedule, ending “$91,525, plus 10.75% of the excess over $1,000,000”. The 2026 estimated tax booklet prints the same seven brackets, so the rates are unchanged for 2026 on the documents read.
What the federal exclusion requires
Most state answers start here. The statute says “Gross income shall not include gain from the sale or exchange” of property that, during the five years before the sale, you owned and used as your principal residence for periods adding up to two years or more. The limit is “shall not exceed $250,000”, or $500,000 for a husband and wife who make a joint return and meet the statute’s conditions. See CMG’s home sale taxes page and exclusion calculator.
A worked example at a $400,000 gain
An illustration, not a return: a married couple in the District of Columbia sells their main home with a gain of $400,000 and meets the federal ownership and use tests. The gain is below the $500,000 joint exclusion, so it is not in federal adjusted gross income and, on the documents read, $0 is taxed by the District of Columbia. As a second illustration, computed below, suppose the gain were $600,000. The amount above the exclusion would then be $100,000, which is taxed at the graduated rates; this page computes no tax because the bracket depends on the rest of the return.
What is collected at the sale
The District charges a deed transfer tax on the seller: “The transferor in a transfer shall have responsibility for payment”. The Recorder of Deeds FAQ prints the residential rates: “1.1 % of consideration or fair market value for residential property transfers” under $400,000, or 1.45% of the entire amount if the transfer is $400,000 or greater. The FAQ prints the same rates for a separate deed recordation tax. D.C. Code 42-1103 says “The parties to a deed which is submitted to the Mayor for recordation shall be jointly and severally liable for payment of the taxes imposed by this section”, and section 47-903 adds that if the transferor fails to pay the transfer tax, “the transferee shall be jointly and severally liable with the transferor for payment of said taxes”. The pages read show no principal-residence exemption from the transfer tax and no income tax withholding on a resident’s sale.
What changes in 2026
The District: the 2025 D-40 booklet says the District passed a law in November 2025 limiting which federal tax changes apply to District taxpayers; none specific to a home sale is shown, and the rate schedule is unchanged.
What the documents do not say
- The pages read do not mention section 121, so conformity is reasoned from the Code’s gross income definition. First-time buyer and other transfer tax relief was not researched. The 2026 estimated tax booklet’s worksheet tells filers to use the 2025 tax rate table, so no separate 2026 schedule was found. The booklet is for tax year 2025.
Common mistakes
- Treating the deed transfer tax as a tax on your profit; it is computed on the consideration, not on gain.
- Applying the 1.1% rate to a sale of $400,000 or more; the FAQ prints 1.45% on the entire amount at that level.
- Assuming the answer for one state applies to another, or that the state answer changes the federal tax on the sale.
Related: home sale taxes, state tax on home sale profit, how Washington, DC taxes capital gains, how Washington, DC taxes pensions, and home sale exclusion calculator.
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Answer againSources
- DC Code 47-1803.02 Gross income: Items included and excluded; adjusted gross income defined: https://code.dccouncil.gov/us/dc/council/code/sections/47-1803.02
- DC Code 47-903 Imposition of tax; rate; returns; liability for tax: https://code.dccouncil.gov/us/dc/council/code/sections/47-903
- ROD FAQs: https://otr.cfo.dc.gov/page/rod-faqs
- District of Columbia (DC) Individual Income Tax Forms and Instructions 2025: https://otr.cfo.dc.gov/sites/default/files/dc/sites/otr/publication/attachments/2025_D40_Book_082026_v1.pdf
- 2026 D-40ES Declaration of Estimated Individual Income Tax booklet: https://otr.cfo.dc.gov/sites/default/files/dc/sites/otr/publication/attachments/2026_D40ES_Book_wLinks04012026.pdf
- DC Code 47-1806.03 Rates of tax: https://code.dccouncil.gov/us/dc/council/code/sections/47-1806.03
- 26 U.S.C. 121, Exclusion of gain from sale of principal residence (U.S. Code, GovInfo): https://www.govinfo.gov/content/pkg/USCODE-2023-title26/html/USCODE-2023-title26-subtitleA-chap1-subchapB-partIII-sec121.htm
- D.C. Code 42-1103, Recordation tax (Council of the District of Columbia; read October 8, 2026): https://code.dccouncil.gov/us/dc/council/code/sections/42-1103
- D.C. Code 47-903, Transfer tax (Council of the District of Columbia; read October 8, 2026): https://code.dccouncil.gov/us/dc/council/code/sections/47-903
Sources: the primary documents linked above, read on October 8, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.