In Washington, D.C., rental income is considered business income. Proprietors, trusts, and business entities that are not a corporation are deemed unincorporated businesses. If you operate as an unincorporated business, you must file a D-30 Unincorporated Franchise Return, with the D.C. Office of Tax and Revenue, each year that the business has a gross income over $12,000 (whether or not it has a net income).
Note: Gross income determines if you need to file. Gross income includes revenue from all D.C. sources after you deduct the cost of goods sold, but before you take off expenses and other deductions allowed when you calculate the net income.
An unincorporated business in D.C., with a gross income over $12,000 from any of (but not limited to) the activities listed below, must also file a D-30 return:
- Rental of real or tangible personal property
- Leasing of real or tangible personal property
- Any other similar arrangement
In addition, if you (the business) sell the property, even if there is no tax due, then you (the business) are required to file a final D-30.
Note again: According to the D-30 tax form, an unincorporated business with a gross income of $12,000 or less does not need to file a D-30 return or pay the $100 minimum franchise tax. But please keep reading. In our experience, if you do what the D-30 form says and you do not file a D-30 and pay the $100 minimum franchise tax, when it comes time to renew your license, you may be issued a Notice of Non-Compliance. If that happens, it can lead to a “Clean Hands” certification issue – the tax office will stop the renewal process to ask you why no return was filed. In some cases, by the time this is resolved with the tax office, you will be past the renewal date of the license, causing you to pay late fees to initiate the renewal. Our advice: To save yourself from future headaches, consider filing a D-30 tax return to show you made less than $12,000.
Aside from the D-30, you may have to file other D.C. returns if you have other business activities with a gross income of $12,000 or less, and you operated as:
- a partnership – file a Form D-65.
- a D.C. resident sole proprietor – Form D-40.
- a D.C. resident trust – file a Form D-41.
If a corporation owns your property, that corporation would file a D-20.
What if, for tax purposes, I claim another state as my home state and file taxes there?
If your principal domicile for tax purposes is other than D.C., you should speak with your tax professional about how this may affect you. You are required to file this tax return even if you are not a resident of the District.
What if I am not a US citizen? Am I required to file a D-30?
If you would not be subject to personal income tax returns because this is considered business income you may likely be subject to the tax. We recommend that you speak with an accountant who can provide advice on your specific case.
As a friendly reminder, RentJiffy is not a tax service or accounting service. You should seek competent advice from your tax professional about this or any other matters related to taxes.