Washington does not have a state income tax on wages, salaries, or most other personal income

Washington is one of nine states with no tax on individual income. You do not pay state income tax on wages, self-employment income, interest, dividends, or capital gains from the sale of stocks and bonds. This applies whether you live in Washington full-time, work there but live elsewhere, or live there but work in another state.

However, Washington does tax certain specific types of income that other states might not. The state also funds itself through sales tax, property tax, and business taxes — which means residents pay those at rates that are often higher than in states with income tax. Understanding what Washington taxes and what it does not helps you plan your overall tax picture.

Key Takeaways

  • Washington has no state income tax on wages, salaries, self-employment income, interest, or capital gains from stock sales.
  • Washington taxes long-term capital gains above a certain threshold at a flat rate, which is different from federal capital gains tax.
  • Washington funds state services through sales tax (currently 6.5% statewide, higher in some counties), property tax, and business taxes.
  • If you work in Washington but live in another state, you do not owe Washington income tax, but you may owe tax to your home state.
  • Federal income tax still applies to all Washington residents and workers — the absence of state income tax does not change your federal obligations.

What Washington taxes instead of income tax

Washington's main revenue source is sales tax. The state rate is 6.5%, but most counties add a local portion, bringing the total to between 8.1% and 10.25% depending on where you shop. This means a $100 purchase costs between $108.10 and $110.25 after tax. Sales tax applies to most goods and some services, though groceries and prescription medications are exempt.

Property tax is the second major source. Washington homeowners and commercial property owners pay property tax to their county and local government. The rate varies by county and local district but typically ranges from 0.84% to 1.1% of assessed property value annually. If you own a home worth $400,000, you might pay between $3,360 and $4,400 per year in property tax, depending on your location.

Washington also taxes long-term capital gains — but only on gains above $250,000 per year per person. This tax applies when you sell stocks, bonds, real estate (other than your primary home), or other investment assets you have held for more than one year. The tax rate is 7%. This is separate from federal capital gains tax, which you also owe to the IRS.

How Washington's capital gains tax works

The capital gains tax is one area where Washington differs significantly from most no-income-tax states. If you sell an investment that has increased in value, you calculate your gain (the sale price minus what you paid for it). If that gain exceeds $250,000 in a single year, Washington taxes the amount above $250,000 at 7%.

Example: You sell stock you bought for $100,000 and sell it for $400,000. Your gain is $300,000. The first $250,000 is not taxed by Washington. The remaining $50,000 is taxed at 7%, which equals $3,500 owed to Washington. You would also owe federal capital gains tax on the full $300,000 gain, calculated at the federal rate (0%, 15%, or 20% depending on your income level).

The $250,000 threshold resets each calendar year. If you have a $200,000 gain one year and a $100,000 gain the next year, each year is calculated separately. The threshold applies per person, so if you are married and file jointly, you and your spouse each have a separate $250,000 threshold.

Who owes Washington taxes and who does not

You owe Washington state tax if you are a resident or if you earn income from a Washington source. Residency for tax purposes usually means you lived in Washington for more than half the year or maintained a permanent home there. If you moved to Washington mid-year, you may owe tax only on income earned after you arrived.

If you work in Washington but live in another state, you do not owe Washington income tax (because there is no income tax), but you may owe tax to your home state on that income. Some states tax residents on all income regardless of where it is earned; others tax only income earned within the state. Your home state's rules determine what you owe there.

If you live in Washington but work remotely for a company in another state, you owe no Washington income tax. You owe federal income tax and whatever tax your employer's state requires — which depends on that state's rules. Most states do not tax remote workers who are not residents, but a few do.

Federal income tax still applies in Washington

Washington's lack of state income tax does not change your federal obligations. You still file a federal tax return with the IRS and pay federal income tax based on your income level, filing status, and deductions. The federal tax brackets, standard deduction, and tax credits all explore to Washington residents the same way they explore to residents of every other state.

If you are self-employed in Washington, you owe federal self-employment tax (Social Security and Medicare tax) but not Washington state self-employment tax. Self-employment tax is a federal obligation that exists in all states, regardless of whether the state has income tax.

Some people mistakenly believe that living in a no-income-tax state means they pay no tax at all. In reality, Washington residents typically pay more in sales tax and property tax than residents of income-tax states pay in those same taxes. The total tax burden depends on your income level, spending habits, and property ownership — not just the presence or absence of income tax.

How to file taxes as a Washington resident

Because Washington has no income tax, there is no Washington state income tax return to file. You file only your federal return with the IRS. You can file using IRS Free File (if your income is below the threshold), through tax software, or with a tax professional.

If you earned income from capital gains above $250,000, you report this on your federal return and also report it to Washington. The Washington Department of Revenue has a form for capital gains tax reporting, though the exact filing method may vary. Check the Department of Revenue website for current instructions and any forms required.

If you own property in Washington, you receive a property tax bill from your county assessor and pay it directly to your county — this is separate from income tax filing. If you made charitable donations, paid mortgage interest, or have other deductions, you claim these on your federal return, not a state return.

Frequently Asked Questions

Do I have to file a Washington state tax return?

No. Washington has no income tax, so there is no state income tax return to file. You file only your federal return with the IRS. If you had capital gains above $250,000, you report those to Washington through the Department of Revenue, but this is not a full tax return.

If I move to Washington from another state, do I owe back taxes?

No. You owe Washington tax only on income earned after you became a resident. Your previous state may still tax income you earned there before you moved, depending on that state's rules. Once you establish Washington residency, you owe no Washington income tax on future income.

Does Washington tax retirement income or Social Security?

No. Washington has no income tax on any type of income, including retirement distributions, pensions, and Social Security benefits. However, you still owe federal income tax on these sources if they exceed the federal threshold for your filing status.

What if I work for a Washington company but live in Oregon?

You do not owe Washington income tax because Washington has no income tax. You owe tax to Oregon on that income because Oregon taxes residents on all income. Oregon's rules determine what you owe, not Washington's.

Is the Washington capital gains tax the same as federal capital gains tax?

No. They are separate taxes calculated differently. Washington taxes long-term gains above $250,000 at a flat 7% rate. Federal tax on long-term gains is 0%, 15%, or 20% depending on your total income, and it applies to all gains regardless of amount. You may owe both taxes on the same gain.