You are required to file a D.C. income tax return if your legal residence was in the District any time during 1976 or if you actually lived in the District (regardless of your legal residence) for more than seven months during the year, and your 1976 income exceeded the amount shown in the table for your filing status.
A nonresident is not required to file a tax return in the District. However, you should file Form D-40-B to claim a refund if Districct tax as withheld from your earnings.
Because of the special relationship of the District to the federal government, there are special rules for certain employees or officials who live in the District. You are exempt from District income tax if you claim domiciliary residence elsewhere and are:
An elected official of the U.S. government.
An officer of the Executive Branch whose appointment was made by the President, required Senate confirmation, and could be terminated at the pleasure of the President.
An employee on the personal staff of an elected official of the Legislative Branch, provided both you and that official are legal residents of the same state.
If you are in this last category, you must file Form D-100 annually to substantiate your claim for exemption.
If you moved your permanent home into or out of the District during 1976, or if you legall domicile) in the District for more than seven months but less than the full year, you must file a part-year return.
Include only income received during the period of residence in the District. Prorate personal and dependent exemptions by month. (Count anything over 15 days as a full month, drop 15 days or less.)
You may not use the tax table or claim the property tax credit. You either may itemize deductions (claiming only those paid during the period covered by the returned) or prorate the standard deduction for the number of months you were a D.C. resident.
In the Adjusted Gross Income Summary on page 2 of Form D-40, list each category of income as it appears on your federal From 1040, with the following modifications:
Salary or wages. A reduction of salary made, by agreement with your employer, to purchase a tax-sheltered annuity (such as TIAA) may not be excluded from gross wages on your D.C. return.
Dividends. The District does not allow the $100-per-taxpayer dividend exclusion authorized on the federal return.
Interest. Exclude interest received on obligations of the U.S. government, any federal agency or instrumentality, or any state or municipality. Use District Schedule B for listing all dividend and interest income, even if either total does not exceed $400.
Income from business or profession. The District does not allow a deduction for contributions to a Keogh (self-employed retirement) plan. Use Schedule C if gross receipts from the business were less than $5,000 for the year, or if the business was carried on solely outside the District.
If gross receipts amounted to $5,000 or more, you may be liable for an unicorporated business franchise tax return. Use Form D-30 instead of Schedule C, then carry your share of any income or loss (to the extent that it was not taxable to the business itself) to Part IV of Schedule E.
Pensions and annuities. There are major differences between federal and D.C. handling of income from pensions. If you contributed to the cost of a pension plan, you need only report and pay tax each year on 3 per cent of the total amount you had paid towards your annuity until you have recovered tax-free an amount equal to your contribution.
After you have recovered that total, of if you did not contribute and were not taxed on your employer's contributions on your behalf, then the entire amount is taxable as ordinary income.
Rental income. If gross rental income from property located in the District exceeded $5,000, and services such as gas and heat were furnished to tenants, you may be liable for filing an unincorporated business franchise tax return.
Nontaxable income. On page 2 of Form D-40, list all income not subject to D.C. tax. On a joint or combined separate return, identify the recipient ("H", "W", or "J" for "joint") for each item.
The District allows the same sick-pay exclusion as the IRS (as limited by the new law). On a full-year return, you may attacch a copy of IRS Form 2440; on a part-year return, use D.C. Form D-2440.(If you are married, you must file either a joint or combined separate return to qualify for this exclusion.)
Moving expenses may be deducted from income only if you itemize, and then only to the extent that reimbursement from your employer is included in income.
Payments into an Individual Retirement Account (IRA) may not be deducted from income on a D.C. return.
The standard deduction is 10 per cent of adjusted gross income up to a maximum of $500 for a married taxpayer filing separately or $1,000 for all others. If you itemize, you generally may take the same deductions as on your federal return with these exceptions:
Medical expense. The District does not permit the special deduction of half of medical insurance permiums; include the full amount of such premiums with other medical expense.
The exclusion of 1 per cent of gross income from the cost of drugs and medicines is not required.
After deduting 5 per cent of adjusted gross income from your total medical expense, any balance may be claimed as an itemized deduction - up to a maximum of $2,500 on a joint return or $1,250 per taxpayer on all others.
Taxes.Eliminate from the federal deduction all state and local income tax payments claimed. Add auto license fees, federal consumer taxes on utilities and transportation, real estate deed recordation taxes, and your share of Social Security taxes paid by you on behalf of domestic employees.
Interest. Delete any interest expense associated with the production of income not subject to D.C. tax.
Contributions. The deduction is limited to qualified organizations which carry on a substantial part of their charitable or educational activities in the District. National health organizations with D.C. chapters qualify, but local organizations whose activities center outside the District do not.
The total deduction for contributions cannot exceed 15 per cent of adjusted gross income. Any unused ballance is lost; it may be carried forward to following years.
Miscellaneous. Most miscellaneous deductions authorized for the federal return also may be taken on your D.C. return, except that you may not claim any deduction related to the production of income exempt from D.C. tax.
A deduction for alimony is allowed only if paid in accordance with a court decree. Political contributions may not be claimed as a deduction, but may qualify for a tax credit, as explained later.
If your adjusted gross income is $5,000 or less, you are submitting a full-year return, and you do nit itemize deductions, find your tax from the table in the instruction booklet.
If your income is more than $5,000, you are filing a part-year return, or you elect to itemize, compute your tax from the tax rate schedule on page 2 of Form D-40.
A tax credit is authorized for political campaign contributions made to any of the candidates specified on page 4 of the instructions. The credit is equal to 50 per cent of qualifying contributions up to a miximum of $50 on a joint return or $25 per taxpayer on all others.
If you were a legal resident of another state for the entire year, you may claim credit on your District return for income tax or intangible personal property tax required to be paid to your home state. Attach a copy of your home-state return to your D.C. return.
Special rules for prorating state tax liability are given in the instruction booklet for anyone who was a D.C. resident for less than the full year.
You may qualify for a special property tax credit if:
You owned or rented your home in the District for the full year;
The house or apartment in which you lived was subject to D.C. real estate tax;
You were not claimed as a dependent by another taxpayer (waived if you were 65 or older by Dec. 31, 1976);and
Your household gross income during all of 1976 was less than $7,000.
"Household gross income" includes all income - taxable or not - received during this year by all individuals living in the home, minus the first $1,000 of earned income received by each qualified dependent (but not by the taxpayer).
If your 1976 household gross income exceeded $7,000 and also exceeded the average of the comparable figures for 1975 and 1974 by at least 30 per cent, you still may qualify by "averaging" income for the three years.
Use Schedule H for calculating the property tax credit. If you are required to file a D.C. individual tax return, enter the amount of the credit on line 11 of Form D-40, and attach Schedule H.
If you have no D.C. tax liability and are not filing a tax return, you should file Schedule H separately to qualify for a refundable credit.
If you rented your house or apartment during 1976, you must submit with Schedule H a completed Form FR-253, Certification of Rent Paid, completed by your landlord.