Washington State has no personal income tax in 2026 — $0 regardless of wages or salary. A new 9.9% income tax on income above $1 million (Chapter 238, Laws of 2026) takes effect January 1, 2028, with first returns due in 2029. Separately, since 2022 Washington has imposed a capital gains tax: 7% on long-term gains above an inflation-adjusted standard deduction ($278,000 for 2025; the 2026 amount is not yet published by DOR), and 9.9% on taxable gains above $1 million from tax year 2025. Business owners pay the B&O (Business and Occupation) gross receipts tax — 1.5% on services revenue (prior-year revenue under $1 million; 1.75% or 2.1% above that), 0.484% on manufacturing. At $100,000 in wages, a WA resident pays $0 in state income tax; at $300,000 in long-term capital gains, they'd owe about $1,540 (7% of the gain above the $278,000 2025 deduction).
At a glance
Key Facts
Personal Income Tax
0% in 2026 — no personal income tax on wages, salaries, or ordinary income. A new 9.9% tax on income above $1 million applies from January 1, 2028 (Chapter 238, Laws of 2026; first return due 2029)
Capital Gains Tax
7% on long-term capital gains above the standard deduction ($278,000 for 2025; 2026 amount not yet published), 9.9% on taxable gains above $1M from tax year 2025; passed 2021, upheld by WA Supreme Court 2023
B&O Tax (Business Income)
Gross receipts tax: 1.5% (services, prior-year revenue under $1M), 0.471% (retailing), 0.484% (manufacturing, wholesaling); no net income deduction — revenue-based, not profit-based
Sales Tax
6.5% state + local (roughly 1.1%–4.2% in Q4 2026); Seattle combined rate: 10.55% — among the highest in the country
Property Tax
Levied locally on assessed value; rates vary by county and taxing district
Estate Tax
Washington has a state estate tax starting at $3M (deaths on or after July 1, 2026; DOR says it is not set to increase going forward) — rates 10%–20%; one of few states with estate tax
Introduction
Washington State has no personal income tax on wages in 2026. In March 2026, however, the state enacted a 9.9% income tax on income above $1 million that takes effect January 1, 2028 (first returns due 2029), so wage income below that level stays untaxed but the long-run "no income tax" premise no longer holds for high earners. Separately, the state's 2021 capital gains tax legislation (ESSB 5096), which survived a constitutional challenge in the Washington Supreme Court in 2023, created a new exception: long-term capital gains above an inflation-adjusted standard deduction ($278,000 for 2025) now face a 7% state tax (9.9% on taxable gains above $1 million from 2025).
This distinction matters enormously. A tech worker earning $500,000 in salary pays $0 in Washington state income tax. But if they exercise stock options generating $400,000 in capital gains, they owe 7% on the amount above the $278,000 deduction (2025 figure) — roughly $8,540. Understanding the boundary between wage income (not taxed) and capital gains (taxed above the threshold) is central to WA tax planning.
Section 01
Washington Capital Gains Tax: What Triggers It and What Doesn't
The WA capital gains tax (passed 2021, effective for 2022, upheld March 2023 by WA Supreme Court) applies only to long-term capital gains above an inflation-adjusted standard deduction ($278,000 for 2025; the 2026 amount is not yet published). The rate is 7% on the first $1 million of taxable gains and 9.9% above that (tax year 2025 onward). Key details:
What IS subject to WA capital gains tax:
Gains from selling stocks, bonds, and mutual funds (long-term, held 1+ year)
Gains from selling cryptocurrency (long-term)
Gains from selling a business (except for certain small businesses)
What is EXEMPT from WA capital gains tax:
Wages, salary, and ordinary income (not taxed by WA at all)
Real estate gains — residential real estate is explicitly excluded
Retirement account gains (IRA, 401(k) distributions not subject)
Gains on small businesses (qualified family-owned businesses exemption)
The standard deduction ($278,000 for 2025), which is subtracted from long-term gains before the tax applies
Practical calculation: If you sell $500,000 in stock with $350,000 in long-term gains: $350,000 - $278,000 standard deduction (2025 figure) = $72,000 taxable. 7% × $72,000 = $5,040 WA capital gains tax. Federal capital gains tax (15% or 20% depending on income) applies separately on the full $350,000.
Section 02
B&O Tax: The Business Tax That Catches Many By Surprise
Washington's Business and Occupation (B&O) tax is a gross receipts tax — it's assessed on revenue, not profit. A business with $1M in revenue but $950,000 in expenses (losing money) still owes B&O tax on the $1M in revenue.
Key B&O rates (2026):
Service businesses: 1.5% (prior-year revenue under $1M; 1.75% from $1M to $4.99M; 2.1% at $5M+)
Retail sales: 0.471%
Manufacturing/processing: 0.484%
Wholesale: 0.484%
Printing/publishing: 0.484%
B&O Small Business Credit: Businesses with low annual B&O liability (below $3,840 a year for filers with mostly service-type income) may qualify for a credit that reduces or eliminates the tax — see the Washington Department of Revenue for details.
For freelancers and consultants: you are subject to B&O tax at 1.5% on your gross income as a service provider (when prior-year revenue was under $1 million). At $200,000 in consulting revenue, that's $3,000 in WA B&O tax before any small business credit — a real additional cost that doesn't exist in most states.
Section 03
Seattle's 10.55% Sales Tax: Among the Highest in the US
Seattle's combined sales tax rate of 10.55% (6.5% state + 4.05% local, per DOR's Q4 2026 rate table) is one of the highest in the country. This matters for everyday purchases and has a real impact on the cost of living:
A $50,000 purchase: $5,275 in sales tax
A $2,000 laptop: $211 in sales tax
$500/week in consumer spending: $52.75/week or ~$2,743/year in sales tax
In comparison, Oregon (no sales tax) and Montana (no sales tax) represent the extremes. The high sales tax partially offsets Washington's advantage of having no income tax for lower and middle-income earners who spend most of their income — though high earners who save more still benefit significantly from no income tax.
Section 04
Washington Estate Tax: A Planning Priority for High-Net-Worth Residents
Washington State has a standalone estate tax starting at $3 million (deaths on or after July 1, 2026; DOR says it is not set to increase going forward). This is significantly below the federal exemption ($15M for 2026), meaning many Washington residents with estates between $3M and $15M owe WA estate tax but no federal estate tax.
WA estate tax rates range from 10% to 20% on the taxable estate. A $5M estate with no deductions owes about $240,000 in Washington estate tax alone (deaths on or after July 1, 2026). Planning strategies commonly used by WA residents include credit-shelter trusts, charitable lead trusts, and annual gifting programs.
Washington is one of about 12 states (plus DC) that still maintain standalone estate taxes post-EGTRRA. The $3M threshold makes estate planning important for many high-value homeowners.
Navigating state income tax — especially if you are relocating, have multi-state income, or are planning retirement — benefits from professional CPA guidance. TaxHub connects you with licensed tax professionals.
⚠ Not for simple single-state returns. Free filing is fine for straightforward W-2 situations.
Not in 2026. Washington State has no personal income tax on wages, salaries, or ordinary income, so you pay $0 in state income tax on employment income this year regardless of how much you earn. However, Chapter 238, Laws of 2026 (signed March 2026) imposes a 9.9% income tax on income above $1 million starting January 1, 2028, with the first return due in 2029, per the Washington Department of Revenue. The absence of a wage income tax is partially offset by a high sales tax (10.55% in Seattle) and an estate tax.
Q
What is Washington State's capital gains tax?
Washington enacted a capital gains tax on long-term capital gains above an inflation-adjusted standard deduction ($278,000 for 2025; 2026 not yet published): 7% on the first $1 million of taxable gains and 9.9% above that from tax year 2025. It was upheld by the WA Supreme Court in March 2023. Real estate gains are explicitly exempt. Wages and ordinary income remain untaxed. The standard deduction is subtracted from long-term gains each year.
Q
What is the B&O tax in Washington?
The B&O (Business and Occupation) tax is a gross receipts tax on Washington businesses. It's assessed on total revenue — not profit. Service businesses pay 1.5% (on prior-year revenue under $1M), retailing 0.471% and manufacturing 0.484%. Unlike an income tax, even money-losing businesses owe B&O tax. There's a small business credit for filers with low B&O liability (below $3,840 a year for mostly service-type income).
Q
What is Washington State's estate tax?
Washington has a state estate tax starting at $3 million (deaths on or after July 1, 2026). Estates above this threshold owe WA estate tax at rates from 10% to 20%. This exemption is much lower than the federal $15M exemption, so many WA residents with estates between $3M and $15M owe state but not federal estate tax.
Q
Is Washington State better than Oregon for taxes?
It depends on income type. WA has no income tax but has high sales tax (10.55% in Seattle) and an estate tax. Oregon has no sales tax but progressive income tax up to 9.9%. For high salary earners who save a lot and buy little, WA wins. For retirees spending most income on goods, Oregon may be similar or better. For those with large capital gains, WA's 7% CGT changes the calculus.
Q
Does WA capital gains tax apply to real estate sales?
No. The WA capital gains tax explicitly exempts real estate. Gains from selling your home or other real property are not subject to WA's 7% capital gains tax (though federal rules still apply, including the $250,000/$500,000 principal residence exclusion).
Disclaimer:This guide is for educational purposes only and does not constitute tax or legal advice. Tax rates and rules change annually. Consult a qualified CPA or tax attorney for advice specific to your situation.