Washington does not have a state income tax on wages or salaries

Washington is one of nine states with no tax on personal income. You will not owe state income tax on money you earn from a job, self-employment, retirement accounts, or investments. This applies whether you live in Washington year-round or work there while living elsewhere.

The state funds itself instead through sales tax, property tax, and business taxes. Washington's sales tax rate is 6.5 percent statewide, though local jurisdictions add their own rate on top — total sales tax ranges from 6.5 to 10.25 percent depending on the county and city where you make a purchase.

Because Washington has no income tax, you will not file a state income tax return to the Washington Department of Revenue. You still file a federal return with the IRS if your income exceeds the federal threshold, but that is separate from state tax.

Key Takeaways

  • Washington residents pay no state income tax on wages, self-employment income, pensions, or investment gains.
  • The state collects revenue through sales tax (6.5 percent plus local additions), property tax, and business taxes instead.
  • You do not file a Washington state income tax return, though you still file federal taxes if required by the IRS.
  • If you moved to Washington from a state with income tax, you may still owe tax to your former state for income earned while you lived there.

What types of income are not taxed in Washington

Washington does not tax wages from employment, whether you work full-time, part-time, or as a contractor. Self-employment income, rental income, and capital gains from selling stocks or property are also not subject to state tax. Retirement income — including Social Security, pensions, and distributions from 401(k) or IRA accounts — is not taxed by the state either.

Interest income and dividend income are not taxed. Money you receive as gifts or inheritance is not taxed. Unemployment benefits paid by Washington are not taxed by the state (though they are taxed federally). The only major income sources that face state tax in Washington are capital gains over $250,000 in a single year, which are subject to a 7 percent capital gains tax starting in 2022 — but this applies only to long-term gains on certain investments and affects a small portion of residents.

How moving to or from Washington affects your tax situation

If you move to Washington from another state, you will not owe Washington income tax on income earned after you establish residency. However, you may still owe income tax to your former state for the portion of the year you lived there and earned income. Most states tax residents on income earned while they lived in that state, even if you move away partway through the year.

If you move away from Washington to a state with income tax, you will owe that state tax on income earned after you become a resident there. Washington will not tax you on income earned after you leave. The key date is when you establish residency in the new state — typically when you move your primary residence, register to vote, get a driver's license, or sign a lease.

If you work remotely for a Washington employer but live in another state, the state where you live will usually tax your wages. Some states have reciprocal agreements that prevent this, but you should check with your state's tax authority or a tax preparer to be certain.

Why Washington has no income tax and what it means for state services

Washington voters have rejected income tax proposals multiple times over the past several decades. The state constitution has been interpreted to require a two-thirds majority in the legislature to pass any new tax, which has made income tax politically difficult to enact. Instead, Washington relies on sales tax as its primary revenue source.

This funding model means Washington residents with higher incomes pay a smaller percentage of their income in state tax than residents in high-income-tax states — but lower-income residents pay a higher percentage because sales tax is regressive (it takes a larger share of income from people who spend most of what they earn). Washington's lack of income tax does not mean the state has fewer services; it means the state funds schools, roads, and social programs through different revenue sources.

Federal income tax still applies to Washington residents

Even though Washington has no state income tax, you still owe federal income tax to the IRS if your income exceeds the federal threshold. For 2024, single filers must file if they earned more than $14,600; married filing jointly must file if they earned more than $29,200. These thresholds change each year.

You file your federal return with the IRS using Form 1040 and any required schedules. Washington residency does not change your federal tax obligations — you follow the same rules as residents of any other state. If you are self-employed, you also owe federal self-employment tax (Social Security and Medicare tax) regardless of where you live.

Capital gains tax in Washington: the one income-based tax

Washington enacted a capital gains tax in 2021 that took effect in 2022. This tax applies to long-term capital gains (profits from selling an asset you held for more than one year) that exceed $250,000 in a single year. The tax rate is 7 percent on the gains above that threshold.

This tax applies only to certain types of investments — primarily stocks and bonds held personally. It does not apply to gains on your primary home, retirement accounts, or most business property. Most Washington residents will never pay this tax because the $250,000 threshold is high. If you sell a rental property or investment portfolio and your gains exceed $250,000, you may owe this tax in addition to federal capital gains tax.

Sales tax and other Washington taxes you do pay

While Washington has no income tax, residents pay sales tax on most purchases. The state rate is 6.5 percent, but cities and counties add their own local sales tax on top. In Seattle, for example, the total sales tax is 10.25 percent. Some items are exempt from sales tax — groceries, prescription medications, and medical equipment are not taxed, but restaurant meals, prepared foods, and most other goods are.

Washington also collects property tax, which varies by county and funds schools and local government. Renters do not pay property tax directly, but landlords pass the cost along through rent. Business and occupation (B&O) tax is paid by businesses based on their gross revenue, not on profit. Estate tax applies to estates over a certain value when someone dies, though this affects only a small number of wealthy estates.

Frequently Asked Questions

Do I have to file a Washington state tax return?

No. Washington has no state income tax, so you do not file a state income tax return. You file a federal return with the IRS if your income exceeds the federal threshold, but that is separate. Some Washington counties require a county tax return for certain types of business income, but most residents do not need to file anything with the state.

If I work in Washington but live in Oregon, do I owe Washington tax?

No. Washington taxes residents on income earned while they live in the state, not on income earned by non-residents working there. Oregon will tax you on your wages because you are an Oregon resident. Oregon and Washington have a reciprocal agreement that prevents double taxation, so you should not owe tax to both states on the same income.

Does the capital gains tax apply to selling my house?

No. The 7 percent capital gains tax does not apply to gains on your primary residence. It applies only to long-term capital gains over $250,000 on investments like stocks, bonds, and investment property — not your home. If you sell a rental property or investment real estate, the capital gains tax may apply to gains above $250,000.

What if I moved to Washington partway through the year?

You do not owe Washington state income tax on income earned before you became a resident. Your former state may tax you on income earned while you lived there. The key is the date you established residency in Washington — typically when you moved your primary residence and obtained a Washington driver's license or registered to vote.

Are retirement benefits like Social Security taxed in Washington?

No. Washington does not tax Social Security, pensions, 401(k) distributions, or IRA withdrawals. These are not taxed by the state. The federal government may tax some of these benefits depending on your total income, but Washington state does not. This is one reason Washington is popular with retirees.