I'm filing D-40B for DC tax erroneously withheld (live in VA). do i count the DC income towards VA state tax as earned wages?

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Yes. Virginia will tax your income regardless of where you earned it. The purpose of the D-40B is to get back the mistaken withholdings from DC (DC does not tax a nonresident of DC), but then you include the income in your resident state return and pay tax on it there. All wages are considered earned income.

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