State guide · District of Columbia · 2026 rules
S corporation in Washington, DC: what the election changes
DC does not recognize S status. An S corporation pays DC’s corporation franchise tax like any corporation, and for many service businesses that is a new tax, not a swap.
Choose a state and enter your profit and salary to see the comparison.
The franchise tax
An S corporation files Form D-20 and pays 8.25% of DC taxable income, with a minimum of $250 ($1,000 above $1 million of DC gross receipts), even with a loss. Your salary is deducted as officer compensation.
Today a sole proprietor or single-member LLC files the unincorporated business franchise tax (Form D-30) at the same 8.25%, but deducts owner pay only up to 30% of net income, plus a $5,000 exemption.
Two groups owe no D-30 at all: businesses with gross income of $12,000 or less, and businesses with more than 80% of gross income from the owner’s personal services where capital is not a material income-producing factor. For them, the election adds the 8.25% tax on the profit left after your salary.
Payroll taxes on your salary
Unemployment insurance: 2.7% for a new employer plus a 0.2% administrative assessment, on the first $9,000 of wages. DC covers any officer of a corporation.
Universal Paid Leave: 0.75% of wages, paid by the employer, with no wage cap.
No pass-through entity tax
DC has no elective pass-through entity tax. A DC-resident owner does not pay twice on the same profit: line 11 of Form D-40 subtracts the S-corporation income taxed on the D-20.
Worked examples
A single-member LLC owner, single filer, 22% federal bracket, default payroll and return costs. The figure is total tax and added costs as an S corporation compared with staying as you are.
| Profit / salary | Personal-service business (no D-30 today) | Business that files D-30 today |
|---|---|---|
| $80,000 / $45,000 | $1,571 higher | $1,896 lower |
| $120,000 / $60,000 | $876 higher | $4,494 lower |
| $200,000 / $90,000 | $491 lower | $9,668 lower |
Starting payroll in District of Columbia
Register for withholding at MyTax.DC.gov, and for unemployment insurance and Paid Family Leave through the DOES Employer Self-Service Portal.
The S corporation files Form D-20 each year as a corporation.
Other states
- Alabama
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- Idaho
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- Pennsylvania
- Rhode Island
- South Carolina
- South Dakota
- Tennessee
- Texas
- Utah
- Vermont
- Virginia
- Washington
- Washington, DC
- West Virginia
- Wisconsin
- Wyoming
Sources
- DC OTR, 2025 D-20 Corporation Franchise Tax Forms and Instructions (revised 11/2025)
- DC OTR, 2025 D-40 Instructions, Line 11
- DC OTR, DC Business Franchise Tax Rates (Title 47, Chapter 18)
- DC OTR, 2025 D-30 Instructions, Line 32
- D.C. Code §29-102.11(a), (c)
- DC DOES, Employer & Agent Portal (ESSP) notice on 2026 tax rates
- D.C. Code §51-101(2)(A)(i)(I)
- D.C. Code §51-103(c)(8)(A), Table VI
- D.C. Code §32-541.03(a)
- DC DOES Office of Paid Family Leave, Employer Information
- D.C. Code §32-541.01 (“Covered employer”)
Federal figures: IRS Publication 15 (2026), Schedule SE and Form 2553 instructions. Every figure was read on an official page and checked a second time. Checked October 24, 2026. How we check facts.