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Capitol West Front
Nearest Metro Station(s): Union Station, Judiciary Square, Capitol South
This is the site of the annual PBS broadcast with the National Symphony Orchestra. Popular hits led by Broadway and country music stars precede the musical finale of the "1812 Overture," punctuated by live cannon and the commencement of the pyrotechnic display. Crowds arrive on the Capitol as early as noon to stake out a good space - just remember that if you can't see the Washington Monument from where you're sitting, you're not going to be able to see the fireworks either!
National Air and Space Museum
Nearest Metro Station: L'Enfant Plaza, Federal Center SW
The Air Force Band traditionally hosts a concert before the fireworks. It's a great place for parents and families, who can use the restroom facilities inside the NASM up until the museum closes at 5:30 pm. Plus there's a food court inside the NASM where you can get dinner so you don't have to bring your food with you on the Metro.
Washington Monument/Lincoln Memorial/Reflecting Pool
Nearest Metro Station: Foggy Bottom or Federal Triangle
This puts you as close to the fireworks as you can get, legally, and those are the closest Metro stations, since the Smithsonian Station is usually closed for security reasons. If you like to hear the BOOM and don't mind craning your neck upwards for a half-hour and possible fallout from fireworks residue, it's a great place to spread a picnic blanket. Be doubly mindful that you might be interfering with another person's view, especially if they arrived hours early to stake out a good spot and now a late-arriver wants them to share it or to sit (or stand) in front of them.
Jefferson Memorial/Tidal Basin
Nearest Metro: Smithsonian, but it'll be closed, so walk from L'Enfant Plaza or Federal Triangle
This site gives you a great view of the Washington Monument and the White House as a backdrop to the fireworks, but it takes a lot of walking to get there without a car. If you drive into town, park along Ohio Drive and walk through the FDR Memorial to the Tidal Basin. Lots of lawn space, but the leaves of those cherry trees that were so beautiful just a few months ago block a lot of potential viewing areas. Restrooms in the basement of the Jefferson Memorial stay open until midnight!
Ellipse/White House South Lawn
Nearest Metro: Federal Triangle, Metro Center
The Ellipse gives you a great view southward with the Washington Monument and the Jefferson Memorial as your backdrops. If you're fortunate enough to know somebody who lives (or works) in the White House complex, the Marine Band (aka "The President's Own") plays patriotic favorites on the South Lawn of the White House for the President and his (or her) guests.
Rosslyn/Iwo Jima Memorial
Nearest Metro: Rosslyn
One of the best views of the fireworks with the National Mall as a backdrop. You can't hear the boom of the explosions, but many people bring their radios for the National Symphony Orchestra's simulcast. From here, the fireworks will only appear a few degrees above the horizon since they're set to explode somewhere between 700 and 1500 feet above the ground (keep in mind that the Washington Monument is only 555 feet tall), but there's a big expanse of lawn for picnicking. The Memorial grounds were under construction in the spring of 2006, so they might not be ready by July.
George Washington Parkway/Arlington Cemetery
Nearest Metro: Arlington Cemetery (with Rosslyn at the northern extreme and Pentagon City at the southern end)
The roads and lawns along the Parkway are jammed with tailgate parties, but pedestrians can wander along the Potomac River until they've found a spot with a view. Just be mindful that the Park Service has erected barricades along the Parkway for your protection, so use the designated crossing points.
National Airport/Gravelly Point
Nearest Metro: National Airport
From the airport terminal, head north along the bike/jogging trail to the wide open expanse known as Gravelly Point. It should be easily recognizable by the airplane junkies with their headsets, fisherman with their poles, Latino soccer players, and lots of families with picnic baskets who arrived by car or bicycle. Just be prepared for the scream of jet engines only a few hundred feet over your heads! This area is filled with all day picnicers on July 4th. Also, lots and lots of people put their boats into the Potomac at this location. Your vehicle/boat will be searched looking for alcohol. This area does fill up and they close the entrance to vehicles at some point before the fireworks. This area does have porta johns.
Or if you prefer the comfort of the great indoors, you can head to the northernmost end of the Main Terminal and enjoy the fireworks from the main or upper concourse as you enjoy a big cup of clam chowder and fried clam strips from the adjacent Legal Sea Foods.
Your hotel balcony or rooftop
Nearest Metro: Depends on your hotel
If you've got the money, splurge and rent a hotel room with a view of the fireworks! The Doubletree Inn in Crystal City, the Key Bridge Marriott or the Sheraton National in Arlington, or in DC, the Mandarin Oriental, the Hotel Washington, the Willard, the JW Marriott, and even the Embassy Suites may offer a room with a view of the fireworks.
Pentagon Heights/Navy Annex
Nearest Metro: Pentagon or Pentagon City
One of the best secrets among Arlingtonians is the view of the fireworks from the hill below the Navy Annex at the foot of Columbia Pike, near the southern gate of Arlington National Cemetery. A broad sloping lawn gives an uninterrupted view of the fireworks from a hill overlooking the Pentagon and the site of the future 9/11 memorial.
Cardozo High School
Nearest Metro: U Street/Cardozo
A little known secret among the DC locals is the playing field of Cardozo High School - it sits high on a bluff overlooking the city, providing a great view of the National Mall, with or without fireworks. It attracts a very diverse crowd, which reflects the neighborhood. If you want to taste the ethnic foods your neighbors are eating, bring extra and offer to share!