For the full state income tax comparison and relocation planning framework, see the State Taxes hub.
Washington is a no-income-tax state for wages and salaries — but imposes a 7% capital gains tax on gains exceeding $262,000.
Washington Income Tax: $0 on Wages
| Income Type | Washington Tax |
|---|---|
| Wages and salaries | $0 |
| Self-employment income | $0 |
| Interest and dividends | $0 |
| Retirement income | $0 |
| Social Security | $0 |
| Long-term capital gains (>$262K) | 7% |
Washington has NO income tax on wages, making it attractive for employees and self-employed workers. However, high-net-worth investors face a 7% capital gains tax.
Washington Capital Gains Tax
In 2021, Washington enacted a 7% tax on long-term capital gains. Here’s how it works:
What’s Taxed
- Long-term capital gains (assets held >1 year)
- Gains exceeding $262,000 threshold
- Sale of stocks, bonds, mutual funds
- Business interests (in some cases)
What’s Exempt
- Real estate sales (including investment property)
- Retirement accounts (401k, IRA, etc.)
- Gains under $262,000 threshold
- Livestock, timber, and agricultural products
- Goodwill from sale of auto dealership
- Small business stock (QSBS rules apply)
Capital Gains Tax Examples
| Total Capital Gains | Taxable Gains | Washington Tax |
|---|---|---|
| $200,000 | $0 | $0 |
| $300,000 | $38,000 | $2,660 |
| $500,000 | $238,000 | $16,660 |
| $1,000,000 | $738,000 | $51,660 |
| $5,000,000 | $4,738,000 | $331,660 |
Charitable Deduction
You can deduct up to $100,000 in charitable contributions from capital gains before calculating tax.
Tax Savings: Washington vs. Other States
| Income | California Tax | Oregon Tax | Washington Tax | Annual Savings |
|---|---|---|---|---|
| $75,000 | $3,586 | $5,625 | $0 | $3,500-$5,600 |
| $100,000 | $5,911 | $8,000 | $0 | $5,900-$8,000 |
| $150,000 | $10,561 | $13,000 | $0 | $10,500-$13,000 |
| $200,000 | $15,211 | $17,500 | $0 | $15,000-$17,500 |
Wage/salary income only — capital gains tax may apply to investment income
Washington Sales Tax
Washington compensates for no income tax with high sales tax:
| Tax Component | Rate |
|---|---|
| State sales tax | 6.5% |
| Average local sales tax | 2.9% |
| Combined average | 9.4% |
| Seattle | 10.35% |
| Maximum combined | 10.6% |
What’s Taxed
- Most retail purchases
- Digital goods and software
- Restaurant meals
- Services (some)
Sales Tax Exemptions
- Groceries (food for home consumption)
- Prescription drugs
- Manufacturing machinery
Washington Business & Occupation (B&O) Tax
Instead of corporate income tax, Washington has a gross receipts tax:
| Category | B&O Tax Rate |
|---|---|
| Retailing | 0.471% |
| Wholesaling | 0.484% |
| Manufacturing | 0.484% |
| Service & other | 1.5-1.8% |
This applies to gross receipts, not profit — so even unprofitable businesses pay B&O tax.
Washington Property Tax
| Metric | Amount |
|---|---|
| Average effective rate | 0.93% |
| Median home value | $485,000 |
| Median property tax | $4,510 |
Washington property taxes are moderate, but high home values (especially in Seattle) lead to substantial tax bills.
Washington Retirement Benefits
Washington is excellent for retirees:
| Benefit | Tax Treatment |
|---|---|
| Social Security | Not taxed |
| 401(k) withdrawals | Not taxed |
| IRA withdrawals | Not taxed |
| Pension income | Not taxed |
| Capital gains (under threshold) | Not taxed |
| Capital gains (over $262K) | 7% tax |
Only high-value portfolio liquidations trigger capital gains tax.
Washington Estate Tax
Unlike most no-income-tax states, Washington has an estate tax:
| Estate Value | Top Marginal Rate |
|---|---|
| $0 - $2.193M | 0% (exempt) |
| $2.193M - $4M | 10% |
| $4M - $6M | 14% |
| $6M - $9M | 15% |
| Over $9M | 20% |
Washington’s estate tax exemption ($2.193M) is lower than federal ($13.61M in 2026).
Cost of Living in Washington
| Category | Washington | National Average |
|---|---|---|
| Overall | 115 | 100 |
| Housing | 147 | 100 |
| Groceries | 105 | 100 |
| Healthcare | 104 | 100 |
| Utilities | 85 | 100 |
Index: 100 = national average
Washington’s higher cost of living (especially housing in Seattle) partially offsets tax savings.
Seattle vs. Eastern Washington
| Factor | Seattle Metro | Eastern WA |
|---|---|---|
| Sales tax | 10.35% | 7.9-8.5% |
| Property values | Very high | Moderate |
| Cost of living | 145% of US avg | 95% of US avg |
| Job market | Tech, healthcare | Agriculture, manufacturing |
Eastern Washington offers lower costs with the same no-income-tax benefit.
Washington vs. Other No-Income-Tax States
| State | Income Tax | Capital Gains | Sales Tax | Property Tax |
|---|---|---|---|---|
| Washington | None | 7% (>$262K) | 9.4% avg | 0.93% |
| Texas | None | None | 8.2% avg | 1.68% |
| Florida | None | None | 7% avg | 0.89% |
| Nevada | None | None | 8.2% avg | 0.55% |
| Tennessee | None | None | 9.55% avg | 0.66% |
Washington’s capital gains tax makes it less attractive for wealthy investors compared to other no-income-tax states.
Remote Work and Washington
If you live in Washington and work remotely:
- Washington won’t tax your wages — No matter where employer is
- Capital gains rules still apply — Investment gains over $262K taxed
- Some states may try to tax you — Check reciprocity rules
Tech Worker Sweet Spot
Washington is ideal for high-earning tech workers:
- No tax on $200K+ salaries
- RSU/stock option vesting is wage income (not capital gains) — untaxed until exercise
- Consider timing large stock sales around $262K threshold
Key Takeaways
- No income tax on wages — Salaries and self-employment income untaxed
- 7% capital gains tax — On long-term gains over $262,000
- Real estate gains exempt — Home sales not subject to capital gains tax
- High sales tax — 9.4% average, over 10% in Seattle
- Estate tax applies — 10-20% on estates over $2.193M
- Great for high earners — No tax on wages regardless of income level
- Consider timing — Large stock sales to stay under $262K when possible
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