Work in Virginia, Live in DC: Which Taxes Apply to Your Paycheck

Reciprocity

Do Virginia and DC have a tax reciprocity agreement?

Yes. Virginia Tax lists the District of Columbia among the five jurisdictions it has reciprocity with; the others are Kentucky, Maryland, Pennsylvania and West Virginia. For a District resident the test has three parts. You must be taxed in your home jurisdiction, commute to Virginia every day, and receive only wage or salary income in Virginia.

Meet all three and Virginia Tax says you are exempt from filing requirements and income tax in the state where you are a nonresident. Your paycheck is taxed once, by the District, on your resident return.

The DC test differs from the one Maryland, Pennsylvania and West Virginia residents face. Those commuters must also be present in Virginia 183 days or less and must not keep an abode such as a house or apartment there. A District resident has no day count to track, but the daily commute is written into the rule, so a work pattern that keeps you in Virginia overnight deserves a closer look (see the section on missing the test).

Returns

Which tax returns does a DC resident with a Virginia job file?

One: DC Form D-40. The Office of Tax and Revenue (OTR) answers this exact situation in its filing FAQ. If you lived in the District and work in Maryland or Virginia, you are required to file a DC tax return. The general triggers also apply: a permanent residence in DC for part or all of the year, or living in DC for 183 days or more.

Report all of your Virginia wages on the D-40. DC taxes an individual domiciled in the District at any time during the year at graduated rates, from 4% on taxable income up to $10,000 to 10.75% on taxable income over $1,000,000. That is the schedule OTR lists for tax years beginning after 12/31/2021, and it is the current table on the OTR rates page. The D-40 is due April 15. If you need more time, a timely Form FR-127 gives a 6-month extension to October 15, but OTR says any tax due must be paid in full with the request; there is no extension of time to pay.

Virginia gets no return from you when you qualify. If you do not qualify, Virginia treats you as a nonresident with Virginia source income, and nonresidents file Form 763.

Form VA-4

How do you stop Virginia tax from being withheld?

Give your employer Form VA-4, the certificate Virginia uses to tell your employer whether you are subject to Virginia income tax withholding, and check line 3 to certify that you are not subject to Virginia withholding. The form instructions list the conditions that qualify for line 3. Condition (c) is the one written for District commuters: you live in Kentucky or the District of Columbia and commute on a daily basis to your place of employment in Virginia.

File it on day one. The VA-4 instructions say you must file the form with your employer when your employment begins, and that without it your employer must withhold Virginia income tax as if you had no exemptions.

The exemption also expires. VA-4 must be filed with your employer for each calendar year for which you claim exemption from Virginia withholding, and the Virginia Tax reciprocity page repeats that you will need to re-certify every year. A January reminder saves you from a year of Virginia withholding you would later have to reclaim.

DC withholding

Who withholds DC tax if your employer is in Virginia?

Possibly no one. OTR notes that when a DC resident works in Maryland or Virginia, the employer may not be required to withhold DC taxes. A Virginia employer that stops Virginia withholding because of your VA-4 does not automatically begin withholding for the District, so your pay stub can show no DC or Virginia income tax at all.

The bill still comes due in April. OTR says you must file Form D-40ES, the DC declaration of estimated tax, if you are required to file a DC return and expect to owe $100.00 or more after subtracting withholding and credits. Missing estimates can bring underpayment interest; Form D-2210 is the DC form for calculating it, and OTR will calculate it for you when your return is processed if you do not.

You have two ways to cover the gap. Ask payroll whether it can withhold DC income tax on your behalf, or set up D-40ES payments sized to the DC tax on your salary. The worked example below shows what that tax looks like at one income level.

Edge cases

What if you do not meet the daily commute test?

The exemption covers wage or salary income and a daily commute. Two situations fall outside it. The first is other Virginia income. Virginia Tax counts income from the rental or sale of Virginia real estate as Virginia source income, so a rented condo in Arlington can put you back on a Virginia nonresident return (Form 763) even if your salary stays exempt. The second is time spent in Virginia. Virginia treats a person who is physically present there, or keeps a place of abode there, for more than 183 days during the year as an actual resident.

If you do file in Virginia, DC still taxes you as a domiciliary, and the D-40 offers an Out of State tax credit. The 2025 D-40 booklet says the credit covers individual income tax paid to other states when the income taxed by that state is derived from that state. It is measured by the total state tax liability on the other return, not the W-2 withholding, and it is limited to the rate of tax charged in the District.

Worked example: DC resident with $80,000 of DC taxable income

Taxable income is after DC deductions. Uses the DC rate schedule for tax years beginning after 12/31/2021 and assumes the employer withholds no DC tax. Illustrative only.

Remote work

Does working from home in DC change anything?

Remote days only reduce your Virginia exposure. Virginia Tax defines income from Virginia sources as income from labor performed, business conducted or property held in Virginia, and lists wages or salaries received for services performed in Virginia as its first example. A day worked at your desk in the District is not a Virginia day.

The District looks at residence, not at where you sat. Its rate schedule applies to the taxable income of an individual domiciled in DC, so office days in Virginia and home days in DC end up on the same D-40.

Hybrid schedules raise one practical question. The exemption, as Virginia Tax words it, speaks of commuting to Virginia every day, and the published guidance does not address a two or three day office pattern. If payroll questions your VA-4, ask Virginia Tax before changing anything. A fully remote DC resident who never works in Virginia has no Virginia source wages to exempt.

Moving

What happens if you move between DC and Virginia mid-year?

A move splits the year on both sides. DC defines a part-year resident as someone who moves into or out of DC during the year with the intent to establish or abandon their domicile there. You still file the D-40, show your period of domicile on Line 2, and prorate credits, exemptions and deductions to the time you were domiciled in DC.

Virginia uses the same idea. A person who moves into Virginia during the year with the intent of becoming a resident is a part-year resident and generally files Form 760PY, prorating personal exemptions and the standard deduction. Once you live in Virginia, the line 3 commuter exemption no longer describes you, so give payroll a new VA-4 without it and let Virginia withholding start.

Moving the other way, from Virginia into the District, reverses the steps: Form 760PY for the Virginia months, the D-40 for the DC months, and a fresh VA-4 claiming the exemption once your home is in DC.

Fixing errors

What if Virginia tax was withheld by mistake?

Fix the future first, then the past. Virginia Tax tells exempt nonresidents to correct their withholding information with the employer, which usually means a new VA-4 with line 3 checked. For tax already taken, file Form 763-S, which Virginia Tax names as the way an exempt resident of a reciprocity state claims a refund.

Do not count the Virginia withholding on your DC return. The D-40 booklet says not to include income tax withheld for other states in the DC tax withheld line, so Virginia withholding does nothing to reduce your District balance. Expect to pay DC in full while the Virginia refund is processed.

Review your W-2 each January. If it shows Virginia wages and Virginia tax for a year in which you qualified, the 763-S is your route back, and a fresh VA-4 keeps it from happening again. Our state reciprocity agreements list shows how the same exemption works for other commuter pairs.