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

Washington State has no tax on the money you earn from a job, a business, or self-employment. You will not see a state income tax line on your pay stub, and you will not file a state income tax return to the state of Washington. This is one of nine states in the country with no income tax on wages.

However, Washington does collect revenue through other taxes. The state uses sales tax, property tax, capital gains tax, and business taxes to fund schools, roads, and services. If you live or work in Washington, you will pay these other taxes even though you do not pay income tax on your earnings.

The federal government still taxes your income. You must file a federal tax return with the IRS every year if your income exceeds the threshold set by the IRS, regardless of where you live. Washington State does not collect any portion of your federal tax.

Key Takeaways

  • Washington State collects no income tax on wages, salaries, or self-employment income.
  • You will still pay federal income tax to the IRS and must file a federal return if your income meets the IRS threshold.
  • Washington funds state services through sales tax, property tax, capital gains tax, and business taxes instead.
  • If you moved to Washington from another state with income tax, you may still owe taxes to your former state on income earned while you lived there.

What taxes Washington does collect

Sales tax is the primary revenue source for Washington State. The statewide rate is 6.5 percent, but local jurisdictions add their own tax, so the total rate varies by county and city. You pay sales tax when you buy most goods and some services. Groceries and prescription medications are exempt from sales tax in Washington.

Property tax is collected by counties and cities on real estate you own. The rate depends on your county and the assessed value of your property. Property tax funds schools, libraries, and local services. If you rent, your landlord pays property tax, which is often factored into your rent.

Capital gains tax applies to the profit you make when you sell certain long-term investments. As of 2022, Washington taxes capital gains of more than $250,000 in a single year at a rate of 7 percent. Most people do not reach this threshold, so this tax affects a small portion of the population.

Business and occupation tax is paid by businesses based on their gross revenue or payroll, depending on the type of business. This is separate from income tax and is collected from employers, not individual workers.

If you moved to Washington from another state

Moving to Washington does not erase tax obligations to your previous state. If you lived in a state with income tax and moved to Washington partway through the year, you typically owe income tax to your former state on the income you earned while you lived there. You will file a part-year return with that state showing only the months you were a resident.

Some states also tax income earned by former residents who move away. This is rare and depends on the specific state's law. If you moved from a state known for this practice, contact that state's tax authority or a tax professional to confirm whether you still owe taxes there.

Washington does not tax income earned by people who have moved away, so once you establish residency in Washington, you will not owe Washington State income tax on future earnings, even if you work remotely for an out-of-state employer.

Federal taxes still apply in Washington

The absence of state income tax does not mean you avoid all income tax. The federal government taxes your income through the IRS, and this applies to everyone in every state. You must file a federal tax return if your income exceeds the threshold set by the IRS for your filing status and age.

For 2024, the federal threshold is roughly $14,000 for a single person under 65, but this amount changes each year. If you are self-employed, you may owe federal self-employment tax even if your income is below the filing threshold. Check the IRS website or speak with a tax professional to determine whether you must file.

Washington State does not provide a state tax refund or credit to offset federal taxes. The state and federal tax systems are separate. Any refund you receive comes from the federal government based on your federal return.

How Washington's lack of income tax affects your budget

Not paying state income tax can mean more money in your paycheck compared to living in a state with income tax. However, Washington's sales tax is higher than the national average, and property taxes vary widely by county. The overall tax burden depends on how much you spend and whether you own property.

If you earn a high income, you may pay less total tax in Washington than in a high-income-tax state. If you spend most of your income on taxable goods and services, the higher sales tax may offset the savings from no income tax. Renters typically pay less total tax than homeowners because they do not pay property tax directly.

Use a tax calculator or speak with a tax professional if you are trying to compare the cost of living in Washington to another state. The comparison depends on your specific income, spending, and property ownership.

Self-employed workers and business owners in Washington

If you are self-employed or own a business, you do not pay Washington State income tax on your business income. However, you must pay federal self-employment tax to the IRS, which covers Social Security and Medicare. This is roughly 15.3 percent of your net business income and is separate from federal income tax.

You will also owe the state's business and occupation tax if your business meets the threshold for your industry. This tax is based on your gross revenue or payroll, not your profit. The rate varies by business classification. Sole proprietors, partnerships, and corporations all pay this tax if they operate in Washington.

Keep records of your income and expenses for federal tax purposes. The IRS requires self-employed people to file Schedule C with their federal return. Washington State does not require a separate state business tax return, but you may need to register your business with the state Department of Revenue.

Frequently Asked Questions

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

No. Washington State does not require residents to file a state income tax return because there is no state income tax on wages or salaries. You will still file a federal return with the IRS if your income meets the federal threshold.

Will I get a state tax refund?

Washington State does not issue income tax refunds because it does not collect income tax. Any refund you receive comes from the federal government based on your federal tax return. Some states offer refundable credits or rebates, but Washington does not have these for income tax purposes.

If I work remotely for an out-of-state company, do I owe Washington tax?

No. As long as you are a Washington resident, you do not owe Washington State income tax on your wages, regardless of where your employer is located. You will owe federal income tax to the IRS. Some states tax residents on income earned anywhere, but Washington does not.

Does Washington tax retirement income or Social Security?

Washington does not tax retirement income, pensions, or Social Security benefits because it has no income tax. You will not pay state tax on these sources of income. You may still owe federal income tax on some retirement income depending on your total income and the type of retirement account.

What if I only lived in Washington for part of the year?

You do not owe Washington State income tax for any part of the year because Washington has no income tax. However, if you lived in another state earlier in the year, you may owe that state's income tax on the income you earned while you were a resident there. File a part-year return with your former state if required.