DC tips tax calculator and tipped minimum wage
The District chose to decouple: in 2025 the Council voted on an emergency basis to reject 13 of the 84 OBBBA tax provisions, including no tax on tips, so tips remain taxable on the D-40 even when the IRS lets you deduct them.
Why the Council decoupled
The Council used the revenue from decoupling the higher-cost federal provisions — tips, overtime, the larger standard deduction and bonus depreciation among them — to fund District programs, including moving the DC earned income tax credit match forward to tax year 2025. For a tipped worker that trade matters: the DC EITC is calculated from income that still includes tips.
District of Columbia figures
| Cash wage / minimum | $10.30 / $18.40 |
|---|---|
| In force | July 1, 2026 – June 30, 2027 |
| Next change | after June 30, 2027 — not yet published |
| Tipped threshold | Not specified |
| Tips on the 2025 return | tips stay taxable in this state. The Council decoupled the District from the federal tips and overtime deductions on an emergency basis in 2025, so tips stay in DC taxable income. Source: Council of the District of Columbia |
| Tips on the 2026 return | tips stay taxable in this state. The decoupling remains in place. Source: Council of the District of Columbia |
A tipped wage that moves every July
District rates change on July 1, not January 1. From July 1, 2026 the minimum is $18.40 and the tipped cash wage is $10.30 — 56% of the standard minimum under the current law, with the remainder allowed as a tip credit. The Department of Employment Services posts the universal wage notice for the Tipped Wage Workers Fairness Amendment Act each year; the July 2027 figures were not out when we verified.
A U Street server
$30,000 of tips is above the $25,000 cap, so the federal deduction is $25,000, saving $3,150. The D-40 taxes all $30,000. In a 32-hour week the $10.30 cash wage pays $330; with $200 of tips the total is $59 short of $589, so the employer pays the difference.
Check a DC workweek at $10.30 cash
Where these figures come from
- DC Office of Tax and Revenue · DC Department of Employment Services, Office of Wage-Hour Compliance
- Council separates elements of District tax code from the federal (2025)
- Minimum Wages for Tipped Employees (table by state) (2026-07-01)
Federal rules: how the deduction works. Nearby: Maryland, Virginia.
Figures verified against primary sources on