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

Washington is one of nine states with no income tax on what you earn from a job. You will not file a state income tax return, and your employer will not withhold state income tax from your paycheck. If you moved to Washington from a state that has income tax, you stop paying it once you become a resident.

This does not mean Washington has no taxes. The state funds schools, roads, and services through sales tax, property tax, and business taxes instead. Your total tax burden depends on what you buy and own, not what you earn.

Key Takeaways

  • Washington has no state income tax on wages, salaries, or self-employment income from most work.
  • You will not file a Washington state income tax return or have state withholding taken from your paycheck.
  • Washington funds state services through sales tax (currently 6.5 percent statewide, higher in some counties), property tax, and business taxes.
  • If you earned income in another state before moving to Washington, you may still owe that state's income tax for the months you lived there.
  • Capital gains tax applies only to long-term gains on certain investments and real estate sales above a high threshold.

What Washington taxes instead of income

Washington's main revenue source is sales tax. The statewide base rate is 6.5 percent, but most counties add a local portion, bringing the total to between 8.1 and 10.25 percent depending on where you shop. This tax is added at checkout on most goods and some services.

Property tax is the second major source. If you own a home or land, your county assessor calculates the value and your local tax rate. Rates vary by county but typically range from 0.7 to 1.1 percent of assessed value per year. Renters do not pay property tax directly, though landlords often pass the cost along in rent.

Washington also taxes businesses through a capital gains tax on profits from selling stocks, bonds, and certain real estate. This applies only to gains above $250,000 in a single year, so most people do not encounter it. The tax rate is 7 percent on gains that exceed the threshold.

If you moved to Washington from another state

When you establish residency in Washington, you stop owing income tax to your previous state on future earnings. However, you remain responsible for income tax to that state for any months you lived there during the tax year. If you moved mid-year, you will file a part-year return in your old state for the months before you left.

Your new employer in Washington will not withhold for your old state. You may need to make estimated tax payments to your former state or settle the balance when you file. Contact that state's revenue department or check their website to confirm what you owe for the partial year.

Self-employment and business income

Washington does not tax self-employment income at the state level. If you are a freelancer, contractor, or small business owner, you will not owe Washington state income tax on your net profit. You still owe federal self-employment tax and federal income tax, which are separate.

Washington does require you to register a business and pay business and occupation (B&O) tax if you operate a business in the state. This is a gross receipts tax — it is based on your total revenue, not your profit. Rates vary by business classification (retailing, wholesaling, services, manufacturing) and range from 0.471 to 1.75 percent. Many small businesses and sole proprietors fall below the threshold and do not owe B&O tax.

Retirement income and pensions

Washington does not tax Social Security benefits, pensions, or retirement account withdrawals at the state level. If you receive a pension from a government or private employer, you will not file a state return on that income. The same applies to distributions from IRAs, 401(k)s, and other retirement accounts.

This is one reason Washington is popular with retirees. Combined with no income tax on wages, it means your retirement income is not subject to state taxation. You will still owe federal income tax on most retirement distributions, but Washington adds nothing on top.

Capital gains tax on investments and real estate

Washington's capital gains tax applies to long-term gains (assets held more than one year) on stocks, bonds, mutual funds, and certain real estate sales. The tax rate is 7 percent, but only on gains above $250,000 in a calendar year. Most people do not reach this threshold, so they pay nothing.

The tax does not apply to gains on your primary residence, retirement accounts, or most agricultural land. It also does not apply to short-term gains (assets held one year or less). If you sell an investment property or stock portfolio, check whether your total gain for the year exceeds $250,000 before assuming you owe tax.

Frequently Asked Questions

Do I have to file a Washington state income tax return?

No. Washington has no state income tax, so you will not file a state return. You still file a federal return if your income exceeds the federal threshold. If you moved to Washington mid-year from another state, you file a part-year return in that state only.

Will my employer withhold state income tax from my paycheck?

No. Washington employers do not withhold state income tax because the state does not tax wages. Your paycheck will show federal withholding, Social Security, and Medicare, but no state income tax line.

Is sales tax higher in Washington because there is no income tax?

Yes. Washington relies on sales tax as its primary revenue source, so rates are higher than in states with income tax. The statewide base is 6.5 percent, and most counties add local tax, bringing totals to 8 to 10 percent. This means you pay more tax on purchases but nothing on earnings.

What if I worked in Washington but lived in Oregon or another state?

You owe Washington no state income tax on that income because Washington does not tax wages. You may owe income tax to the state where you lived, depending on that state's rules. Check with your home state's revenue department about whether you must file there.

Does the capital gains tax apply to selling my house?

No. The capital gains tax does not apply to gains on your primary residence. It applies only to investment properties, stocks, bonds, and certain other assets. Even then, only gains above $250,000 in a single year are taxed.