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Washington State Has No Income Tax: The Full 2026 Breakdown

Q: Does Washington state have an income tax?

Washington state has no income tax on wages, salary, or ordinary income. However, Washington enacted a 7% capital gains excise tax on the sale of stocks, bonds, and other capital assets above $250,000 per year. This was upheld by the Washington State Supreme Court in March 2023. Washington also has a Business and Occupation (B&O) tax on gross business receipts.

Q: What is Washington's capital gains tax?

Washington's capital gains excise tax is 7% on long-term capital gains above $250,000 per year. Real estate sales are exempt. Retirement accounts (401k, IRA) are exempt. The first $250,000 of gains is exempt for all taxpayers. The tax was upheld by the state Supreme Court in 2023 and applies retroactively from January 1, 2022. High earners selling stocks, businesses, or investments above the threshold owe this tax.

Q: What is the sales tax rate in Washington state?

Washington's state sales tax is 6.5%. Cities and counties add between 0.5% and 4%, bringing the average combined rate to approximately 9.2%. King County (Seattle) is 10.25%. Spokane is 8.9%. Groceries and prescription drugs are exempt from Washington sales tax.

Q: What is the B&O tax in Washington?

Washington's Business and Occupation (B&O) tax is a gross receipts tax on business revenue, not net income. Rates vary by business type: 0.471% for manufacturing, 0.484% for services, 0.484% for retailing. Unlike most states, there is no deduction for expenses or cost of goods sold. This makes it particularly burdensome for low-margin businesses.

Washington state has no income tax on wages or salary. But it enacted a 7% capital gains excise tax in 2021 (upheld by the state Supreme Court in 2023), has one of the highest combined sales tax rates in the nation at 9.2%, and levies a Business and Occupation (B&O) tax on gross business receipts.

Important 2023 update: Washington's 7% capital gains excise tax on gains above $250,000 was upheld by the state Supreme Court on March 24, 2023. High earners selling stocks or businesses owe this tax.

Last reviewed April 2026. Sources: Washington Department of Revenue, Tax Foundation, BEA.

Quick Facts: Washington Taxes 2026

Wage Income Tax

No tax on wages or salary

Capital Gains Tax

On gains above $250K/yr

Combined Sales Tax

9.2%

Seattle: 10.25%

Avg Property Tax

0.94%

$3,760/yr on $400K home

B&O Tax

Varies

0.47-0.48% of gross receipts

Estate Tax

Yes

On estates above $2.193M

Cost of Living

111

11% above national average

Median Home

$580K

Very high in King County

The Capital Gains Tax: What You Need to Know

Washington enacted a 7% excise tax on long-term capital gains above $250,000 per individual per year. The Washington State Supreme Court upheld the tax in March 2023 (Quinn v. State of Washington), ruling it is an excise tax on a transaction, not an income tax, and therefore does not violate the state constitution's requirement that taxes be uniform on property. Retroactive application started January 1, 2022.

Who owes Washington capital gains tax?

Taxable: Long-term gains from stocks, bonds, mutual funds, and most business sales above $250,000/yr per person ($500K for a married couple filing jointly)
Exempt: Real estate sales (including your primary home and investment property)
Exempt: Retirement account distributions (401k, IRA, 403b)
Exempt: Small family-owned businesses (qualified small business stock exemptions apply)
Exempt: Agricultural land sales

For a tech employee in Seattle with $300,000 of RSU vesting in a year, the tax on the $50,000 above the threshold is $3,500. For an entrepreneur selling a business for $2M with $1.75M in capital gains, the tax is approximately $105,000.

The B&O Tax: For Business Owners

Washington's Business and Occupation (B&O) tax is unusual: it is levied on gross business receipts, not net income. There is no deduction for expenses. This means even an unprofitable business owes B&O tax if it has revenue. For service businesses at 0.484% of revenue: a $500,000 revenue practice pays $2,420 in B&O tax regardless of whether it made a profit.

The B&O tax is filed separately from personal income taxes and applies to virtually all businesses in Washington. Sole proprietors, LLCs, corporations, and partnerships all pay it. There is a small business B&O tax credit that eliminates the tax for businesses with annual revenue below approximately $50,000.

Washington Estate Tax

Washington is one of only six states with a state estate tax. Estates above $2.193 million (2024 threshold, adjusted annually for inflation) owe Washington estate tax on the amount above the threshold. Rates range from 10% to 20%. For a Washington resident with a $3M estate, approximately $80,000 to $160,000+ in Washington estate tax is owed above the federal estate tax. This is a significant consideration for high-net-worth retirees.

Who Washington Works Best For

Tech workers with W-2 income below $250K gains

Excellent

Amazon, Microsoft, Boeing employees earning primarily W-2 wages pay no state income tax. If your RSU grants keep capital gains below $250K per year, you owe no capital gains tax either. Seattle's tech salary premium is real.

High earners with large capital gains

Caution

If you regularly sell $250K+ in stock each year, you now owe 7% capital gains tax. Consider timing sales to stay below the threshold or evaluate whether other states offer a better deal for your specific situation.

Retirees with estates above $2.2M

Serious caution

Washington's state estate tax is a major cost for high-net-worth retirees. If your estate exceeds $2.193M, Washington estate tax rates of 10-20% apply. Compare to Florida, Texas, and Wyoming which have no estate tax.

Remote workers (wage income)

Very good

Wage income remains fully exempt from Washington state tax. If you work remotely and your employer is not in New York, Connecticut, Delaware, Nebraska, or Pennsylvania, you owe no state income tax.

Washington Tax FAQ

Does Washington state have an income tax?

Washington has no income tax on wages or salary. However, it enacted a 7% capital gains excise tax on gains above $250,000 per year (upheld by the state Supreme Court in March 2023) and a B&O tax on business gross receipts.

What is Washington's capital gains tax?

7% on long-term capital gains above $250,000 per individual per year. Exempt: real estate, retirement accounts (401k, IRA), and some small business sales. Applies from January 1, 2022 onward.

What is the sales tax rate in Washington state?

State rate 6.5%. Seattle/King County total: 10.25%. Average statewide combined: approximately 9.2%. Groceries and prescription drugs are exempt.

What is the B&O tax in Washington?

A gross receipts tax on business revenue (not net income). Rates: 0.471% for manufacturing, 0.484% for services and retailing. No deduction for expenses. Applies to virtually all Washington businesses.

Sources: Washington Department of Revenue (dor.wa.gov), Washington State Supreme Court ruling Quinn v. State (March 2023), Tax Foundation. Last reviewed April 2026. Not tax advice.

Total Tax Burden

How WA compares to all 50 states

Overall Rankings

Where Washington ranks by persona

Residency Checklist

How to establish WA domicile