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

Washington is one of nine states with no tax on earned income. You will not owe state income tax on wages, salary, self-employment income, or most other forms of personal income. This applies whether you live in Washington full-time, work there part-time, or moved there during the year.

However, Washington funds state government through other taxes. The state relies heavily on sales tax, capital gains tax, and business taxes to pay for schools, roads, and services. Understanding what you do owe — and what you do not — matters for your tax planning, especially if you recently moved to or from Washington.

Key Takeaways

  • Washington has no state income tax on wages, salaries, or most personal income, so you will not file a state income tax return.
  • Washington taxes capital gains at 7 percent on profits over $250,000 from the sale of long-term investments, effective in 2022.
  • The state has a 6.5 to 10.25 percent sales tax depending on your county, which applies to most purchases.
  • If you moved to Washington from a state with income tax, you may still owe that state's tax on income earned before you left.
  • Self-employed people in Washington do not owe state income tax but must still pay federal self-employment tax.

What Washington taxes instead of income

Washington makes up the lost income tax revenue through a capital gains tax and a broad sales tax. The capital gains tax applies to the sale of stocks, bonds, real estate (other than your primary home), and other long-term investments. You owe 7 percent on gains above $250,000 in a single year. This threshold applies per person, so a married couple filing jointly can each exclude $250,000 before the tax kicks in.

Sales tax in Washington ranges from 6.5 to 10.25 percent depending on which county you live in. Most counties add local sales tax on top of the state rate. You pay this tax at the register on most goods and some services. Groceries, prescription medications, and medical equipment are exempt. Prepared food and restaurant meals are taxed.

Washington also taxes business income, property, and certain services. If you own a business, you may owe the state's business and operations tax (B&O tax) based on gross revenue, not profit. The rate depends on your business classification and ranges from 0.471 to 1.75 percent.

How the capital gains tax works in practice

The capital gains tax applies only to long-term investments held for more than one year. Short-term gains (from selling something you owned for one year or less) are not subject to the state tax. The $250,000 threshold is per person per year, so if you sell stocks for a $300,000 gain, you owe tax on $50,000 of that gain.

You report capital gains on your federal tax return, and Washington uses that information to calculate what you owe the state. If you sold a rental property, investment real estate, or a business interest, you will likely owe the capital gains tax. Your primary residence is exempt — selling your home does not trigger the tax.

The capital gains tax is relatively new (it began in 2022) and has faced legal challenges. The current law stands, but if you have large investment sales planned, it is worth reviewing the rules with a tax professional to understand the timing and structure that works best for your situation.

Moving to Washington from another state

If you moved to Washington from a state with income tax, you may still owe that state's tax on income you earned before you left. Your former state taxes income earned while you were a resident, even if you move away mid-year. You will need to file a part-year resident return in your old state for the months you lived there.

Washington will not tax that same income again. States generally do not tax income earned in another state, so you will not pay Washington income tax on wages you earned in California or New York. However, you may owe tax to both states on income earned in Washington before you moved, depending on your former state's rules.

If you moved from a state with no income tax (like Texas or Florida), you have no prior-state tax obligation. You straightforward start fresh in Washington with no state income tax to file.

Self-employment and business income in Washington

Self-employed people in Washington do not owe state income tax on their net business income. However, you still owe federal self-employment tax (Social Security and Medicare), which is a federal obligation, not a state one. You will file Schedule C with your federal return to report business income and expenses.

If your business is structured as a sole proprietorship or partnership, you report income on your personal federal return. If you operate as an S-corporation or C-corporation, different rules explore, and you may owe Washington's B&O tax based on gross revenue. The B&O tax is not an income tax — it is a tax on the total revenue your business brings in, regardless of profit.

Many self-employed people in Washington benefit from the lack of state income tax, but the B&O tax and sales tax on business purchases can offset some of that advantage. A tax professional can help you understand whether your business structure makes sense given Washington's tax environment.

What you still file with the federal government

Even though Washington has no state income tax, you still file a federal income tax return with the IRS if your income exceeds the federal threshold. In 2024, that threshold is $14,600 for a single person and $29,200 for a married couple filing jointly (these amounts change yearly). You report all income — wages, self-employment, investment income, and other sources — on your federal return.

You may also owe federal capital gains tax on investment sales, separate from Washington's state capital gains tax. Federal rates depend on your income level and how long you held the investment. Long-term capital gains are taxed at 0, 15, or 20 percent federally, depending on your tax bracket.

Washington's lack of state income tax does not change your federal obligations. You still claim deductions, credits, and adjustments the same way you would if you lived in any other state.

Frequently Asked Questions

Do I need to file a Washington state tax return?

No. Washington has no state income tax, so you do not file a state income tax return. You only file a federal return with the IRS if your income exceeds the federal threshold. If you sold investments for a large gain, you may owe Washington's capital gains tax, but you report that on a separate form, not a full state return.

If I work in Washington but live in Oregon, do I owe Washington tax?

No. Washington taxes residents on income earned anywhere, but does not tax non-residents on income earned in the state. Oregon, which has state income tax, will tax you on your Washington wages because you are an Oregon resident. You will file an Oregon return and claim a credit for any taxes paid to other states.

Does Washington tax retirement income or Social Security?

No. Washington has no state income tax on any form of income, including pensions, 401(k) withdrawals, IRA distributions, and Social Security benefits. This is one advantage of retiring in Washington compared to states with income tax.

What happens if I sell my home in Washington?

You do not owe Washington capital gains tax on the sale of your primary residence. The capital gains tax applies to investment property and long-term investments, not your main home. You may owe federal capital gains tax if you have a large gain, but that is a federal rule, not a Washington rule.

Is Washington's sales tax higher because there is no income tax?

Washington's sales tax is higher than average, ranging from 6.5 to 10.25 percent depending on location. The state uses sales tax and capital gains tax to replace the revenue it would collect from income tax. If you spend a lot, you may pay more in total state tax in Washington than in a state with income tax but lower sales tax.