Washington State Tax Guide 2026
Washington is one of only 9 states in the United States with NO state income tax on wages. However, in 2022, Washington introduced a capital gains tax on high earners.
⚠️ Washington Capital Gains Tax (NEW 2022):
- 7% tax on capital gains over $278,000 (2025-2026 threshold)
- 9.9% tax on capital gains over $1 million (new for 2025+)
- Applies to: stocks, bonds, business interests, tangible assets
- Exemptions: real estate, retirement accounts (401k, IRA), certain small business sales
🎯 9 States with No Income Tax (2026):
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
What Taxes DO You Pay in Washington?
While Washington has no state income tax on wages, residents still pay:
- Federal Income Tax: Standard federal rates apply (10% - 37%)
- Federal Self-Employment Tax: 15.3% on net self-employment income
- Capital Gains Tax (WA): 7% on gains over $278k, 9.9% over $1M
- Property Tax: ~0.84% average, capped at 1% annual increase
- Sales Tax: 6.5% state + up to 4.1% local = 9.43% average (4th highest in US!)
Washington Capital Gains Tax Details
What's Taxed:
- Stocks and bonds
- Business interests
- Tangible personal property
- Cryptocurrency (likely, consult tax professional)
What's Exempt:
- Real estate (including vacation homes)
- Retirement accounts (401k, IRA, Roth IRA)
- Assets held in qualified retirement plans
- Certain small business sales (with conditions)
- Livestock and agricultural property
How Washington Funds Government Without Income Tax
- High Sales Tax: 6.5% state + local (9.43% average - 4th highest in US)
- Property Taxes: Average 0.84% of home value
- Business & Occupation Tax: Tax on gross receipts for businesses
- Capital Gains Tax: New revenue source (started 2022)
2026 Federal Tax Brackets (Applies to WA Residents)
| Tax Rate |
Single |
Married Filing Jointly |
| 10% | $0 - $12,400 | $0 - $24,800 |
| 12% | $12,401 - $49,500 | $24,801 - $99,000 |
| 22% | $49,501 - $105,400 | $99,001 - $210,800 |
| 24% | $105,401 - $201,150 | $210,801 - $402,300 |
| 32% | $201,151 - $255,425 | $402,301 - $510,850 |
| 35% | $255,426 - $640,600 | $510,851 - $768,700 |
| 37% | $640,601+ | $768,701+ |
Federal Standard Deduction 2026
- Single: $16,100
- Married Filing Jointly: $32,200
- Head of Household: $24,150
Pros and Cons of Living in Washington
Pros:
- No state income tax on wages and salaries
- No estate or inheritance tax (federal exemption applies)
- Tech hub (Microsoft, Amazon, Boeing)
- Beautiful natural scenery
- No capital gains tax if under $278k/year
Cons:
- Very high sales tax (9.43% average)
- Capital gains tax for high earners (7-9.9%)
- Property taxes fund local services
- High cost of living in Seattle area
- Rainy weather
Is Washington Good for Investors?
Washington is still attractive for investors, but less so after the 2022 capital gains tax. Key considerations:
- No tax on first $278k of capital gains annually
- Real estate gains still exempt
- Retirement account gains exempt
- 7% state tax + ~20-24% federal = 27-31% total on large gains
- California still higher overall (13.3% state income tax)
Important: This calculator provides estimates for federal taxes and Washington capital gains tax. For investment planning and capital gains strategies, consult with a Washington CPA or tax professional.