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

If you work in Washington or live there, you do not pay state income tax on the money you earn. Washington is one of nine states with no income tax on wages, and that applies whether you are a resident, a nonresident who works there, or someone who moved to Washington mid-year.

This does not mean Washington has no taxes at all. The state funds schools, roads, and services through sales tax, property tax, capital gains tax, and other sources. But the tax you see withheld from a paycheck in most states — state income tax — does not exist in Washington.

Key Takeaways

  • Washington collects no state income tax on wages, salaries, or most other earned income.
  • The state does tax capital gains (profits from selling stocks, real estate, or other investments) at 7 percent if your gains exceed $250,000 in a year.
  • Washington funds state services through sales tax (currently 6.5 percent statewide, higher in some counties), property tax, and other levies.
  • If you moved to or from Washington during the tax year, you still file a federal return, but you will not owe Washington state income tax on any portion of the year.

What Washington taxes instead of income

Washington replaced income tax revenue with a sales tax, which is applied at the point of purchase. The state sales tax 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. Groceries, prescription medications, and some medical equipment are exempt.

The state also collects property tax on real estate, which is assessed by county and varies widely. A homeowner in one county may pay a different effective rate than a homeowner with the same home value in another county. Property tax bills arrive annually or semi-annually depending on the county.

Washington introduced a capital gains tax in 2022. If you sell stocks, investment real estate, or other long-term capital assets and your total gains exceed $250,000 in a single calendar year, you owe 7 percent tax on the gains above that threshold. This applies to Washington residents and nonresidents who sell Washington property.

How the lack of income tax affects your federal return

You still file a federal income tax return even though Washington has no state tax. The federal government taxes income regardless of which state you live in. Your federal return is separate from any state return.

Because Washington has no state income tax, you will not file a state return at all — there is nothing to file. If you moved to Washington from another state during the year, you may owe tax to your previous state for the months you lived there, but you will owe nothing to Washington for any portion of the year. If you moved away from Washington, the same rule applies in reverse.

Nonresidents and people who work in Washington

If you live outside Washington but work there, you do not owe Washington state income tax. Washington taxes income only on residents, and even then, only on certain types of income (wages are exempt; capital gains above $250,000 are not).

If you are a nonresident who owns rental property or sells property in Washington, you may owe capital gains tax on the sale, but not income tax on the rent. Check with a tax professional if you have investment income tied to Washington property, because the rules differ by income type.

Retirement income and pensions in Washington

Washington does not tax Social Security benefits, pensions, or retirement account withdrawals (such as distributions from an IRA or 401(k)). This is one reason some retirees move to Washington — the combination of no income tax and no tax on retirement income can result in lower overall state tax burden.

If you receive a pension from a public employer (such as a teacher's pension or police officer's pension), Washington does not tax it. The same applies to military pensions and federal pensions. Private pensions and annuities are also untaxed in Washington.

Self-employment and business income

If you are self-employed or own a business in Washington, you do not owe Washington state income tax on your business income. You will owe federal self-employment tax and federal income tax, but Washington collects nothing on business earnings.

You may owe other Washington taxes depending on your business type — for example, a retail business collects and remits sales tax, and certain professions require a business and occupation (B&O) tax. But income tax does not apply. Consult the Washington Department of Revenue website or a tax professional if you are unsure whether your specific business owes other state taxes.

Moving to or from Washington mid-year

If you moved to Washington partway through the year, you do not owe Washington state income tax for any month of that year. Your previous state may tax you for the months you lived there, depending on that state's rules. You will owe federal income tax for the full year regardless of where you lived.

If you moved away from Washington, the same principle applies — you owe nothing to Washington for the year you left. Your new state may tax you starting the month you arrived. Keep records of your move date (lease, utility bills, or a change-of-address confirmation) in case either state asks when your residency changed.

Frequently Asked Questions

Do I have 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. If you owe capital gains tax (gains over $250,000 in a year), you report that on your federal return; Washington does not issue a separate form for it.

Will my paycheck be smaller in Washington than in other states?

Your paycheck will not have state income tax withheld, so it will be larger than it would be in a state with income tax, assuming the same salary. However, Washington's sales tax is higher than many states, so your take-home advantage depends on how much you spend.

What if I work remotely for a company outside Washington but live there?

You do not owe Washington state income tax. Washington taxes only residents on income earned in the state. If you are a resident working remotely for an out-of-state employer, you still owe no Washington income tax. Your employer may withhold for the state where their office is located, but you can request a correction when you file your federal return.

Does Washington tax unemployment benefits or disability payments?

No. Washington does not tax unemployment insurance benefits, Supplemental Security Income (SSI), or Social Security Disability Insurance (SSDI). These are not subject to state income tax in Washington.

If I sell my house in Washington, do I owe capital gains tax?

No. The capital gains tax applies only to investment assets held long-term, not to your primary residence. Selling your home is exempt. If you own rental property or investment real estate and sell it for a gain over $250,000, you may owe the 7 percent capital gains tax.