Washington D.C. LLC Taxes: The UBT Deep Dive
D.C.'s Unincorporated Business Franchise Tax is the single most consequential tax detail in this guide — an 8.25% tax on net income that catches freelancers and founders off guard more than anything else in the district's LLC process. Here's exactly how it works, with an estimator that models both the exemption and the full tax.
Most D.C. LLCs — those taxed as sole proprietorships or partnerships — with D.C.-sourced gross receipts over $12,000 owe the Unincorporated Business Franchise Tax (UBT): 8.25% of net income, after a 30% salary allowance and a $5,000 exemption, filed via Form D-30. A minimum tax applies even at zero net income: $250 (gross receipts ≤$1M) or $1,000 (above $1M). Exemption: LLCs where more than 80% of gross income comes from personal services, and capital isn't a material income-producing factor, are generally exempt. Add federal self-employment tax of 15.3% and D.C.'s graduated individual income tax, 4% to 10.75%.
- UBT rate
- 8.25% of net income
- UBT threshold
- D.C. gross receipts over $12,000
- Personal-services exemption
- Yes — if >80% of income
- UBT minimum tax
- $250 or $1,000
- Individual income tax
- Graduated, 4%–10.75%
- Sales tax
- 6% → 7% (Oct 1, 2026)
The Tax Layers in D.C.
The Unincorporated Business Franchise Tax (UBT)
8.25% of net income for most default LLCs with D.C. gross receipts over $12,000 — the layer covered in depth below.
Federal: income + self-employment tax
Pass-through profits (net of any UBT paid) hit your 1040 at your federal bracket, plus 15.3% SE tax on 92.35% of net profit.
D.C. individual income tax: graduated, up to 10.75%
Seven brackets, among the higher top rates in the country, applying to pass-through income that flows to your personal return.
Sales tax: 6% → 7% (if applicable)
Rising October 1, 2026. See Step 7.
UBT + Income Tax Estimator
Washington D.C. UBT + Income Tax Estimator
Models both the UBT exemption and the full tax · educational estimate
The Personal-Services Exemption, In Depth
This is the escape valve many solo D.C. founders qualify for without realizing it. If more than 80% of your LLC's gross income comes from personal services rendered by the members, and capital is not a material income-producing factor, your LLC is generally exempt from the UBT. This covers a lot of solo consultants, freelance writers, coaches, and similar service providers — but it does not cover businesses with significant inventory, equipment, or capital investment driving the income, even if the owner also does substantial personal work. If you're unsure whether you qualify, this is genuinely worth a conversation with a D.C. CPA rather than assuming either way.
The S-Corp Question in D.C.
An S-Corp election changes federal taxation: reasonable salary (payroll-taxed) plus distributions that escape the 15.3% SE tax. File Form 2553 — never Form 8832. In D.C. specifically, remember that S-corps also owe the same 8.25% franchise tax as unincorporated businesses (filed as the Corporate Franchise Tax, Form D-20, at the identical rate) — so electing S-Corp status doesn't avoid D.C.'s entity-level tax the way it might in states with no equivalent. Run the full math with a D.C. CPA before electing.
Your D.C. Tax Calendar
| Date | What's Due |
|---|---|
| Apr 15 / Jun 15 / Sep 15 / Jan 15 | Quarterly estimated taxes — federal and D.C., on pass-through profit |
| April 1 (every 2 years) | Biennial Report to the DLCP ($300) |
| Apr 15 (annual) | Form D-30 Unincorporated Business Franchise Tax, if applicable |
| Apr 15 | Form 1040 + D.C. Form D-40 |
| Monthly/Quarterly | Sales tax returns via MyTax.DC.gov, if applicable |
Ahmad Adil's Take: I want to close this D.C. guide exactly where I opened it, because it's the single most important thing to understand about forming here: the UBT is real, it's 8.25%, and it applies to more LLCs than founders expect. If you're genuinely a solo consultant whose income comes from your own personal services, take real comfort in the 80% exemption — you're likely in a very reasonable tax position, especially combined with the low $99 formation fee. If your LLC involves real capital, inventory, or multiple members splitting profit from something beyond direct personal services, budget the UBT as a serious, recurring cost from day one. This is the one detail in the entire District of Columbia formation process I'd never want anyone to discover after the fact.
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Washington D.C. LLC — FAQ
Ahmad Adil is the founder and CEO of LLC School. The figures here — the $99 Articles of Organization, the $300 Biennial Report due every two years, and DC’s Unincorporated Business Franchise Tax — reflect current DLCP and DC Office of Tax and Revenue guidance. This is educational content, not legal or tax advice.
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