Taxes in Washington: State Tax Guide 2026
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Taxes in Washington: State Tax Guide 2026
Tax information is for educational purposes only and does not constitute tax advice. Consult a licensed tax professional for your specific situation.
Washington State has no traditional income tax, making it attractive for wage earners and salaried employees. However, the state imposes one of the highest sales tax rates in the nation, a capital gains tax on high earners, and above-average property taxes. Understanding all three is essential for evaluating Washington’s true tax burden.
Washington Income Tax Rates (2026)
Washington has no state income tax on wages, salaries, or most income.
However, Washington does impose a capital gains tax:
| Tax | Rate | Threshold |
|---|---|---|
| Capital gains tax | 7.00% | Long-term gains over ~$250,000 |
This tax, upheld by the Washington Supreme Court in 2023, applies to the sale of stocks, bonds, and other capital assets (not real estate). It affects a small number of high-income investors but represents a significant departure from Washington’s traditional no-income-tax stance.
Exempt from the capital gains tax:
- Real estate sales
- Retirement account distributions
- Assets held in retirement accounts
- Gains from the sale of a family-owned business (under certain conditions)
- Livestock, timber, and commercial fishing
Washington Business Taxes
Washington does not have a corporate income tax. Instead, it relies on the Business and Occupation (B&O) Tax:
| Classification | Rate |
|---|---|
| Retailing | 0.471% |
| Wholesaling | 0.484% |
| Manufacturing | 0.484% |
| Service and other | 1.50% |
The B&O tax applies to gross receipts — not profits — making it unique and potentially burdensome for low-margin businesses.
Sales Tax
| Component | Rate |
|---|---|
| State base rate | 6.50% |
| Average combined (state + local) | 9.29% |
| Seattle combined rate | 10.35% |
Washington has one of the highest combined sales tax rates in the nation.
Exempt from sales tax: Most groceries (food for home consumption), prescription medications.
Property Tax
| Metric | Amount |
|---|---|
| Average effective rate | 0.84% |
| National average | 0.99% |
Property taxes are slightly below the national average, though absolute tax bills in the Seattle metro area are high due to elevated home values.
Property Tax Relief
- Senior/disabled exemption: Qualifying homeowners 61+ with income under ~$58,423 may receive reduced property taxes
- Property tax deferral: Available for qualifying seniors and disabled individuals
- Levy lid: State property tax limited to ~$10 per ~$1,000 of assessed value (1%)
How Washington Compares to National Averages
| Tax Type | Washington | National Average |
|---|---|---|
| Top income tax rate | 0.00% (7% on capital gains) | ~5.0% |
| Effective income tax (~$75K) | 0.0% | ~3.5% |
| Sales tax (combined avg) | 9.29% | 6.6% |
| Property tax (effective) | 0.84% | 0.99% |
| Overall tax burden rank | Mid-range (regressive) | — |
Who Benefits from Living in Washington
Washington may work well for:
- High-wage earners — Tech workers, doctors, and executives in Seattle earn high salaries with no state income tax on wages
- W-2 employees in general — No income tax on employment income of any amount
- Retirees without large capital gains — No income tax on pensions, Social Security, or IRA distributions
- Oregon residents who shop in Washington — No sales tax in Oregon means Oregon residents pay neither state’s tax
Washington may be costly for:
- Investors with large capital gains — The 7% tax on gains over $250,000 adds up quickly
- Frequent shoppers — 9.29%+ sales tax on most non-grocery purchases
- Seattle homeowners — While the rate is moderate, high home values create large absolute tax bills
- Low-income earners — Washington’s tax system is among the most regressive in the nation (heavy reliance on sales tax hurts lower-income residents disproportionately)
- Service businesses — The 1.50% B&O tax on gross receipts (not profits) can be burdensome
Washington-Specific Considerations
- No estate tax below ~$2.193 million — Washington’s estate tax kicks in at a lower threshold than the federal exemption, with rates up to 20%
- B&O tax has no deduction for costs — Applied to gross receipts regardless of profitability
- REET (Real Estate Excise Tax): Graduated rate from 1.1% to 3.0% on real estate sales, based on sale price
- No reciprocal agreements — Washington has no income tax agreements with other states
- Working Families Tax Credit: Refundable credit for lower-income residents (based on federal EITC)
- Long-term care payroll tax (WA Cares): 0.58% employee payroll tax funds a long-term care benefit
Key Takeaways
- Washington has no income tax on wages, salaries, pensions, or retirement distributions
- A 7% capital gains tax applies to long-term gains over ~$250,000 (excluding real estate)
- Sales tax averages 9.29%, among the highest in the nation
- Property taxes are slightly below the national average by rate but high in absolute terms in Seattle
- The tax system is considered regressive — lower-income residents pay a higher percentage of income in sales and excise taxes
- Washington’s estate tax has a lower exemption (~$2.193 million) and higher rates (up to 20%) than most states
Next Steps
- Compare Washington to other states at State Income Tax Comparison: All 50 States Ranked
- Calculate your federal taxes with the Tax Bracket Calculator 2026
- Capital gains concerns? See Capital Gains Tax Guide: Short-Term vs Long-Term Strategies
- Estate planning in Washington? Review Estate and Inheritance Tax Guide 2026
- Find a Washington CPA — Find a CPA Near You