Washington does not have a state income tax
Washington is one of nine states with no state income tax on wages, salaries, or other earned income. You will not file a state income tax return to Washington, and your employer will not withhold state income tax from your paycheck. This applies whether you work in Washington, live in Washington, or both.
However, Washington does collect revenue through other taxes. The state has a sales tax, property tax, and business-and-occupation tax. Some specific types of income — capital gains above a certain threshold, for example — may be subject to state tax under particular circumstances. But ordinary wages and salaries are not.
If you moved to Washington from a state with income tax, or if you work across state lines, the rules about which state taxes your income depend on where you earned it and where you live. Those situations are covered in the sections below.
Key Takeaways
- Washington collects no state income tax on wages, salaries, or most other earned income.
- You will not owe Washington state income tax on money you earn while working in Washington, even if you live in another state.
- Washington funds state services through sales tax, property tax, and business taxes instead.
- If you work in a state with income tax while living in Washington, that state may still tax your income.
- Capital gains above $250,000 in a single year are subject to a Washington state tax, though this affects very few workers.
How Washington funds state services without income tax
Washington relies on sales tax as its largest source of state revenue. The statewide sales tax rate is 6.5 percent, though local jurisdictions add their own sales tax on top, bringing the total to between 8.1 and 10.45 percent depending on where you shop. This tax applies to most goods and some services.
Property tax is the second major source. Homeowners and commercial property owners pay annual property tax to their county or local taxing district. The rate varies by location but is typically between 0.7 and 1.0 percent of assessed property value.
Washington also taxes businesses through the business-and-occupation tax, a gross-receipts tax on business income. Different rates apply depending on the type of business — manufacturers, wholesalers, retailers, and service businesses each pay different percentages.
The state also collects excise taxes on fuel, alcohol, and tobacco, and fees for vehicle registration and licensing. Together, these sources fund schools, transportation, healthcare, and other state services.
What happens if you work in Washington but live elsewhere
If you work in Washington and earn wages there, Washington will not tax that income — because Washington has no income tax. Your employer will not withhold Washington state income tax from your paycheck.
However, your home state may still tax you on that income. If you live in a state with income tax and work in Washington, you may owe income tax to your home state on the money you earn in Washington. Your home state taxes based on residency, not where the work happens. You should file a tax return in your home state and report all income, including income earned in Washington.
Some states offer a credit for taxes paid to other states, which can reduce or eliminate double taxation. Check with your home state's tax authority or a tax professional to understand your specific situation.
What happens if you work elsewhere but live in Washington
If you live in Washington but work in another state, that state will tax your income according to its own rules. Washington will not tax you on that income, because Washington has no income tax.
The state where you work will withhold income tax from your paycheck based on that state's tax rates and your filing status. You will file a tax return in that state and report your income there. You will not file a Washington state income tax return, because Washington does not have one.
If you work in multiple states during the same year, you may need to file returns in more than one state. A tax professional can help you understand which states require a return and how to report income earned in each.
Capital gains tax in Washington
Washington has a capital gains tax that applies to long-term capital gains above $250,000 in a single calendar year. Long-term capital gains are profits from selling assets you held for more than one year — typically stocks, real estate, or other investments.
The tax rate is 7 percent on gains above the $250,000 threshold. For example, if you sold stock and realized $350,000 in long-term capital gains in one year, you would owe tax on $100,000 of that gain (the amount above $250,000).
This tax does not apply to short-term capital gains (assets held one year or less), and it does not apply to most workers unless they have significant investment income. If you sell a home you lived in, federal rules may exclude some or all of the gain from taxation, which would also reduce or eliminate Washington's capital gains tax on that sale.
How to handle taxes if you moved to or from Washington
If you moved to Washington during the year, you will file a tax return in your previous state for the months you lived there and earned income there. That state will tax you based on the income you earned while a resident. You will not file a Washington state return, because Washington has no income tax.
If you moved away from Washington during the year, you will file a return in your new state for the months you lived there. Again, you will not file a Washington return. Your previous state may require you to file a part-year resident return showing income for only the months you lived there.
When you move, update your address with your employer so they withhold tax for the correct state. If you moved mid-year and your employer withheld for the wrong state for part of the year, you can correct this when you file your tax return.
Other Washington taxes that affect residents
Even though Washington has no income tax, residents and workers pay other state taxes. The sales tax is the most visible — you see it added to purchases at checkout. Groceries are exempt, but most other goods and many services are taxed.
Property tax applies if you own real estate or other taxable property. Excise taxes apply to gasoline, diesel, alcohol, and tobacco — these are built into the price you pay. Vehicle registration fees are required to register a car, truck, or motorcycle in Washington.
If you own a business, you will pay the business-and-occupation tax. If you rent rather than own, you do not pay property tax directly, but your landlord's property tax may be reflected in your rent.
Frequently Asked Questions
Do I have to file a Washington state income tax return?
No. Washington has no state income tax, so there is no Washington state income tax return to file. You may still need to file a federal return and a return in another state if you lived or worked there during the year.
If I work in Washington, do I pay Washington income tax?
No. Washington does not tax wages or salaries, regardless of where you live. However, if you live in another state with income tax, that state may tax you on income you earned in Washington.
Will my employer withhold Washington state income tax from my paycheck?
No. Washington employers do not withhold state income tax because Washington has no income tax. Your employer will withhold federal income tax and Social Security and Medicare taxes, but not Washington state income tax.
What if I have capital gains — does Washington tax those?
Washington taxes long-term capital gains above $250,000 in a single year at a rate of 7 percent. Most workers do not reach this threshold. Short-term gains and gains below $250,000 are not taxed by Washington.
I moved to Washington from a state with income tax. Do I still owe that state taxes?
You owe taxes to your previous state only on income you earned while living there. Once you move to Washington and establish residency, you file a return in your previous state for the part of the year you lived there, then stop filing there. Washington will not tax you on any income.