Washington State Does Not Have a Personal Income Tax

Washington State does not tax wages, salaries, or most other forms of personal income. You will not file a state income tax return or owe state income tax on money you earn from a job. This is one of nine states in the country with no personal income tax, alongside Florida, Nevada, South Dakota, Tennessee, Texas, Wyoming, Alaska, and New Hampshire.

Because Washington has no income tax, the state funds schools, roads, and services through other taxes: sales tax, property tax, and business taxes. This means your paycheck is not reduced by state income withholding, but you pay tax when you buy things and when you own property.

Key Takeaways

  • Washington State does not tax income from wages, salaries, self-employment, or retirement accounts.
  • You will not owe state income tax even if you work in Washington and live in another state, or vice versa.
  • Washington funds state services through sales tax (currently 6.5% statewide, higher in some counties), property tax, and business taxes instead.
  • If you moved to Washington from a state with income tax, you do not need to file a Washington state income tax return.
  • Some types of income — capital gains over $250,000 per year — are taxed under a separate Washington law, though most people do not reach this threshold.

What Types of Income Are Not Taxed in Washington

Wages and salaries from any employer are not subject to Washington State income tax. This includes full-time jobs, part-time work, and seasonal employment. Self-employment income is also not taxed by the state, so if you run a business or work as a contractor, you do not owe Washington State income tax on that money.

Retirement income is not taxed either. Distributions from 401(k) accounts, IRAs, pensions, and Social Security benefits are all free from Washington State income tax. Interest and dividend income from investments are not taxed by Washington. Unemployment benefits, workers' compensation, and disability payments are also not subject to state income tax.

The one exception is long-term capital gains — profit from selling stocks, real estate, or other investments you held for more than a year. Washington taxes capital gains above $250,000 per year at a rate of 7%. Most people do not reach this threshold, so this tax affects a small portion of the population.

How Washington Funds State Services Without Income Tax

Washington relies on sales tax as its primary revenue source. The statewide sales tax rate is 6.5%, but most counties add a local sales tax on top of that, bringing the total to between 8% and 10.9% depending on where you shop. You pay sales tax on most goods and some services, but not on groceries, prescription medications, or medical equipment.

Property tax is the second major funding source. If you own a home or land in Washington, you pay property tax to your county based on the assessed value of your property. The rate varies by county but typically ranges from 0.7% to 1% of the property's value per year.

Washington also taxes businesses through the Business and Operations Tax (B&O tax), which is a gross receipts tax on business revenue. Different business types pay different rates. The state also collects excise taxes on gasoline, alcohol, and other specific products.

If You Moved to Washington From Another State

If you moved to Washington from a state with income tax, you do not need to file a Washington State income tax return. Washington has no income tax to report, so there is no state return to file. You may still owe taxes to your previous state if you lived there for part of the year — that depends on the rules of that state, not Washington's.

When you move to Washington, update your address with your employer's payroll department so they stop withholding state income tax for your old state. If you worked in multiple states during the same year, you may need to file part-year returns in both states, but this is handled through those states' tax systems, not Washington's.

If You Work in Washington But Live Elsewhere

If you live in another state but work in Washington, you do not owe Washington State income tax on your wages. Washington does not tax income earned by non-residents. You will owe income tax to the state where you live, based on that state's rules.

The reverse is also true: if you live in Washington but work in another state, that state may tax your income. You would file a return in the state where you work and may also need to file a return in Washington to claim a credit for taxes paid to the other state, though Washington's lack of income tax makes this simpler than in other situations.

Capital Gains Tax and When It Applies

Washington's capital gains tax is separate from income tax and applies only to long-term capital gains — profit from selling an asset you owned for more than a year. The tax rate is 7% on gains above $250,000 per year. This means if you sell a stock, investment property, or other asset at a profit, you only owe Washington tax if your total long-term gains for the year exceed $250,000.

Short-term capital gains (from assets held one year or less) are not subject to Washington's capital gains tax. Gains below the $250,000 threshold are also not taxed. This tax is relatively new — it took effect in 2022 — and has faced legal challenges, so the rules may change.

Frequently Asked Questions

Do I have to file a Washington State tax return?

No. Washington has no personal income tax, so you do not file a state income tax return. You may still need to file a federal return with the IRS, but that is separate from Washington State.

Will my paycheck have state income tax withheld?

No. Your employer will not withhold Washington State income tax from your paycheck because the state does not have an income tax. You may see federal income tax withheld, Social Security tax, and Medicare tax, but not a state income tax line.

If I get a refund from another state, do I owe Washington anything?

No. A refund from another state is not income that Washington taxes. You keep the full refund. Washington does not tax refunds, rebates, or money returned to you from any source.

What if I inherit money or receive a gift?

Washington does not tax inheritances or gifts. You receive the full amount with no state income tax owed. Federal estate tax may apply to very large inheritances, but that is a federal matter, not a Washington State matter.

Is the capital gains tax the same as income tax?

No. The capital gains tax is separate and only applies to profit from selling investments above $250,000 per year. Most people do not reach this threshold. It is not the same as income tax on wages or salary.