Washington state income tax: what you pay instead

Not on wages, salaries or other pay. The Department of Revenue’s income tax page says “Washington does not currently have an individual income tax,” so no state income tax is withheld from a Washington paycheck and there is no Washington income tax return to file for 2026.

That does not mean Washington has no taxes. Retail sales tax is, in the department’s words, “Washington’s principal tax source,” and most businesses are subject to the business and occupation tax on their gross receipts. Individuals also meet the capital gains tax, the estate tax and two payroll premiums; the table shows the ones people ask about most, with their 2026 figures.

Your federal return does not change. Most U.S. citizens and permanent residents who work in the United States have to file one, wherever they live, and Washington’s capital gains tax starts from the long-term gains reported on it.

In March 2026 the Legislature passed Senate Bill 6346, and the governor signed it on March 30, 2026, as Chapter 238, Laws of 2026. Beginning January 1, 2028, it taxes Washington taxable income at 9.9%, after a standard deduction of $1,000,000. Spouses and state registered domestic partners share one $1,000,000 deduction whether they file jointly or separately, and the Department of Revenue is to adjust it for inflation every other year from October 2029.

Nothing is owed under it for 2026 or 2027, and the department says the first returns will be due in April 2029. Residents would be taxed on income from all sources and nonresidents only on income from Washington sources, and the law allows credits for Washington capital gains tax and for income tax paid to another state on the same income.

Its future is not settled. The law has been challenged in Klickitat County Superior Court, and Initiative Measure No. IP26-645, on the November 3, 2026 ballot, would repeal it. Check the department’s income tax page for its status before planning around it.

Since 2022 Washington has taxed the sale or exchange of long-term capital assets, such as stocks, bonds and business interests, generally ones held for more than a year. It is an excise tax that only individuals pay, but you can owe it on your share of a sale made by a partnership, LLC, S corporation or other pass-through entity. You file a return only if you owe the tax.

The tax reaches only gains allocated to Washington. A gain on stocks, bonds, cryptocurrency or other intangible property is allocated here if you were domiciled in Washington when you sold. A gain on tangible property, such as art or collectibles, is allocated here if the property was in Washington when it was sold, and in some cases even if it was not, and a credit is allowed for income or excise tax paid to another state or country on the same gain.

For 2025 and later years the rate is tiered: 7% on the first $1 million of taxable Washington capital gains, and 9.9% on the part above $1 million, which is the 7% tax plus an additional 2.9%. Taxable gains are what is left after a standard deduction, $278,000 for 2025, which a married couple or domestic partners share. The Department of Revenue adjusts the deduction for inflation each October and must post the 2026 amount by October 31, 2026.

Exemptions work sale by sale, so you can owe tax on one sale and not on another. Real estate is exempt whatever kind it is, wherever it is, however long you owned it and whether or not you lived in it. The main exemptions and deductions are listed below.

The return is due the same day as your federal return, which for 2026 gains is April 15, 2027. It is filed electronically through My DOR or tax software, together with a copy of your federal return, and the tax is paid electronically. There are no quarterly estimated payments, but starting with tax year 2026 you can prepay up to six months early, so a 2026 payment can be made from October 15, 2026.

A federal extension does not carry over on its own. You request a Washington extension through My DOR by April 15, and you qualify only if you have a federal filing extension. It gives more time to file, not to pay, and once you request an extension or make a payment you must file a return even if no tax turns out to be due.

Washington taxes the right to transfer property at death, separately from any federal estate tax. A return is required when the gross estate, counting assets wherever they are, is over the filing threshold and the person who died was domiciled in Washington, or was a nonresident who owned real estate or tangible personal property in Washington. A return can be required even when no tax is due.

The rules have changed twice since mid-2025. A 2025 law raised the exclusion to $3,000,000 and the top rate to 35% for deaths on or after July 1, 2025. A 2026 law, ESB 6347, put the rates back to 10% to 20% for deaths on or after July 1, 2026, and set the exclusion at $3,000,000, which the Department of Revenue says is not set to increase going forward. The tax is figured on the estate left after deductions and the exclusion.

The return and any tax are due nine months after the date of death. A six-month extension to file is available, but it does not extend the time to pay, and interest accrues daily on tax not paid within the nine months.

Sales tax has two parts: a state rate of 6.5% in 2026, and a local rate that varies by city and county. Sellers charge the combined rate for the place where the buyer receives the goods or services. For October 1 to December 31, 2026, the Department of Revenue’s list of combined rates runs from 7.6% to 10.7%, and Seattle’s is 10.55%; local rates can change each quarter, so use the department’s Tax Rate Lookup Tool for an exact address.

Since October 1, 2025, a 2025 law, ESSB 5814, has applied sales tax to services that were not taxed before, including advertising, IT services such as help desk support and data processing, custom website development, live presentations, security and investigation services, temporary staffing, and custom software. From July 1, 2026, a 2026 law added exclusions for some live presentations, an exemption for schools and libraries buying certain of these services, and a change to the exclusion for staff provided to hospitals.

Use tax covers what sales tax missed. When no sales tax was paid on something used in Washington, the buyer owes use tax at the combined rate where it is first used. The department’s own example is a Washington resident who buys items in Oregon and uses them in Washington without having paid sales tax: the buyer must report and pay use tax, which individuals can do through My DOR or on a paper Consumer Use Tax Return.

Two deductions on a Washington pay stub can look like state income tax, but both are premiums for state insurance programs. The WA Cares Fund, the long-term care program, takes 0.58% of gross wages in 2026 with no wage cap, and employees pay it unless their employer chooses to. Self-employed people are not covered unless they opt in.

Paid Family and Medical Leave has a 2026 premium of 1.13% of gross wages, not counting tips, up from 0.92% in 2025, on wages up to $184,500, the 2026 Social Security cap. Employees pay 71.43% of it and employers 28.57%, although employers with fewer than 50 employees need not pay their part. On $80,000 of 2026 wages, the employee’s share comes to about $646, and WA Cares to $464.

The business and occupation tax is paid by the person or business doing business in Washington, and it taxes gross receipts rather than income: it is figured on the value of products sold or the income the business earns, with no deduction for labor, materials or other costs. In 2026 retailing is taxed at 0.471%, wholesaling and manufacturing at 0.484%, and, since October 1, 2025, service and other activities at 1.5%, 1.75% or 2.1%, depending on whether the prior year’s taxable income in that classification was under $1 million, from $1 million to just under $5 million, or $5 million or more. A small business credit can reduce the tax, and many cities charge their own B&O tax on top.

Having no state income tax at home does not cover pay earned in another state. Oregon taxes nonresidents only on income from Oregon sources, and its Department of Revenue says that if you don’t live in Oregon, you pay its tax only on wages for work you do inside Oregon, not for work you do at home or elsewhere outside it. Nonresidents report that income on Form OR-40-N, and in 2026 employers also withhold Oregon’s statewide transit tax, one-tenth of 1%, from nonresidents’ Oregon wages.

A home in Oregon can change that: Oregon also treats you as a resident for a tax year if you maintain a residence there and spend more than 200 days in the state that year. So can a move. If you move between Washington and a state with an income tax, that state’s part-year resident rules decide what it taxes; Oregon, for example, taxes a part-year resident on all income earned or received while a resident, plus Oregon-source income for the rest of the year.

A move also matters for Washington’s capital gains tax, because a gain on stocks or other intangible property is allocated to Washington only if you were domiciled here on the day of the sale. Your federal return is filed under the same IRS rules wherever you live.