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, or if you work across a state line, this is a significant change in what you owe.

Washington does tax certain types of income that are not wages — capital gains, for instance — but the vast majority of working people pay nothing. This means your take-home pay is larger than it would be in states like California, New York, or Oregon, which all tax wages at rates between 1 and 13 percent depending on income level.

Key Takeaways

  • Washington has no state income tax on wages, salaries, or tips, so you will not owe state tax on money from a job.
  • Capital gains — profit from selling stocks, real estate, or other investments — are taxed at 7 percent if you sell for more than $250,000 in a single year.
  • You still file federal income tax returns; the absence of state tax does not affect what you owe the federal government.
  • Washington makes up lost tax revenue through sales tax (currently 6.5 to 10.25 percent depending on location) and property tax, so your overall tax burden depends on how much you spend and own.

What income is taxed in Washington

Wages, salaries, tips, and self-employment income from a job or business are not taxed by the state. Neither are pensions, Social Security, unemployment benefits, or interest and dividends from most investments. If your income comes from working, Washington does not take a cut.

The one major exception is capital gains — the profit you make when you sell an asset for more than you paid for it. If you sell stock, real estate, or other property and your gain is more than $250,000 in a single calendar year, Washington taxes that gain at 7 percent. Gains of $250,000 or less are not taxed. This rule applies to individuals and married couples filing jointly; the threshold does not double for joint filers.

Long-term capital gains (assets held more than one year) and short-term gains (held one year or less) are taxed at the same rate. If you sell a house for a profit, the gain counts toward the $250,000 threshold, though most people do not hit it on a single home sale.

How Washington funds state services without income tax

Washington relies on sales tax and property tax to fund schools, roads, and other services. The state sales tax is 6.5 percent, but local taxes add on top of that — your total sales tax rate ranges from 6.5 to 10.25 percent depending on which county and city you live in. This means you pay tax on most things you buy, including groceries in some cases.

Property tax is assessed on the value of real estate you own. Rates vary by county but typically fall between 0.7 and 1.1 percent of your home's assessed value per year. If you own a home worth $500,000, you might pay $3,500 to $5,500 annually in property tax alone.

Because Washington has no income tax, people who earn high incomes but spend and own less pay less total tax than they would in a state with income tax. People who spend most of their income on taxable goods and services, or who own property, may pay more. The overall tax burden is not uniform across income levels the way an income tax is.

Federal income tax still applies

The absence of Washington state income tax does not change what you owe the federal government. You still file a federal return with the IRS, report all income, and pay federal tax based on your filing status and income level. Federal tax rates range from 10 to 37 percent depending on how much you earn.

If you work for an employer, they withhold federal tax from your paycheck based on the W-4 form you fill out. If you are self-employed, you pay federal tax through quarterly estimated payments or when you file your return. Washington state does not collect any of this money — it all goes to the IRS.

What to do if you work across state lines

If you live in Washington but work in another state, or live in another state and work in Washington, tax rules depend on where you work and where you live. Most states tax income earned within their borders, regardless of where the worker lives. If you work in Oregon (which has income tax) but live in Washington, Oregon will tax your wages, and you may owe tax to both states.

Some states offer credits to prevent double taxation. Washington, having no income tax, cannot offer a credit, but the other state may. You should report income to the state where you worked and check whether you owe anything to Washington. A tax preparer familiar with multi-state work can sort this out, but the general rule is: you owe tax to the state where you earned the money.

If you recently moved to Washington from another state, you do not owe back income tax to Washington for years you did not live there. Your Washington tax obligation starts the year you establish residency.

Capital gains tax details and thresholds

Washington's capital gains tax applies only to gains over $250,000 in a single year. The tax is 7 percent on the amount above that threshold. If you sell an investment for a $300,000 gain, you pay 7 percent on $50,000 — that is $3,500. If you sell for a $200,000 gain, you pay nothing.

The $250,000 threshold resets each calendar year. If you have a $200,000 gain in 2024 and a $100,000 gain in 2025, each year stands alone — you owe nothing either year because neither exceeds $250,000. If you have a $400,000 gain in a single year, you pay 7 percent on $150,000.

Losses do not offset gains for purposes of the threshold. If you sell one asset for a $300,000 gain and another for a $100,000 loss, your net gain is $200,000, but the tax is calculated on the $300,000 gain. You pay 7 percent on $50,000 of that gain.

Frequently Asked Questions

Do I need to file a Washington state tax return?

No. Washington has no state income tax, so there is no state return to file. You file only a federal return with the IRS. If you have capital gains over $250,000 in a year, you report that on your federal return, and Washington's tax is calculated based on federal reporting.

If I move to Washington, do I get a refund of state taxes I paid before?

No. You owe income tax to the state where you lived and worked when you earned that income. Moving to Washington does not change what you owed in previous years. Your tax obligation to Washington begins the year you move there.

Does Washington tax retirement income or Social Security?

No. Pensions, 401(k) withdrawals, IRA distributions, and Social Security benefits are not taxed by Washington state. You may owe federal tax on some of these, but Washington takes nothing. This is one reason many retirees move to Washington.

What if I sell my house — do I owe capital gains tax?

Only if your profit exceeds $250,000. If you buy a house for $400,000 and sell it for $600,000, your gain is $200,000 — no tax. If you sell for $700,000, your gain is $300,000, and you owe 7 percent on $50,000 of that gain. Most home sales do not trigger this tax.

Can I deduct Washington sales tax on my federal return?

You can deduct either state income tax or state sales tax on your federal return, but not both. Since Washington has no income tax, you would deduct sales tax if you itemize deductions. However, most people take the standard deduction instead, which is usually larger. Check with a tax preparer to see which option benefits you.