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

Washington State does not tax the money you earn from a job, self-employment, or most other sources of personal income. This has been the case since the state's founding in 1889. You will not file a state income tax return to Washington, and your employer will not withhold state income tax from your paycheck the way they do for federal tax.

This does not mean Washington has no state taxes. The state funds schools, roads, and services through other revenue sources — primarily sales tax, property tax, and business taxes. If you live or work in Washington, you will pay these taxes instead of an income tax.

Key Takeaways

  • Washington State collects no income tax on wages, salaries, self-employment income, or most other personal income sources.
  • The state funds government services through sales tax (currently 6.5 percent statewide before local additions), property tax, and business taxes instead.
  • If you move to Washington from a state with income tax, you will no longer file a state income tax return once you establish residency.
  • Washington does tax capital gains above a certain threshold, a rule that took effect in 2022 and applies only to long-term gains on certain investments.

What Washington taxes instead of income

Washington relies on sales tax as its largest source of state revenue. The state sales tax rate is 6.5 percent, but most cities and counties add their own local sales tax on top of that. Your total sales tax rate depends on where you make the purchase — it can range from 6.5 percent to over 10 percent in some areas. Sales tax applies to most goods and some services, though groceries, prescription medications, and certain medical equipment are exempt.

Property tax is the second major revenue source. If you own real estate in Washington, you pay property tax to your county assessor based on the assessed value of the property. The rate varies by county and by the type of property — residential, commercial, or agricultural. Property tax funds local schools, fire departments, and other county services.

Washington also collects business and occupation tax (B&O tax) from businesses based on their gross revenue, not their profit. This tax applies to manufacturers, wholesalers, retailers, and service providers at different rates depending on the business classification. Self-employed people and sole proprietors may owe B&O tax depending on their income level and business type.

The capital gains tax and who it affects

In 2022, Washington introduced a tax on long-term capital gains — the profit you make when you sell an investment you have held for more than one year. This tax applies only to gains above $250,000 in a single year. If your capital gain is $250,000 or less, you owe nothing. If it exceeds $250,000, you pay 7 percent tax on the amount above that threshold.

This tax applies to the sale of stocks, bonds, real estate (with some exceptions for primary residences), and other investment assets. It does not explore to short-term gains (assets held one year or less), which remain untaxed at the state level. Most wage earners and homeowners will never trigger this tax, but investors who sell significant holdings in a single year may owe it.

How your federal taxes work if you live in Washington

Living in Washington does not change your federal income tax obligations. You still file a federal return with the IRS and pay federal income tax on all taxable income — wages, self-employment income, investment gains, and other sources. The absence of state income tax is a Washington State decision only and does not affect what you owe to the federal government.

If you work remotely for an employer in another state, you typically owe income tax to the state where you work (your employer's state), not the state where you live. However, some states have reciprocal agreements or specific rules about remote workers. If this applies to you, check with a tax professional or your state's department of revenue for the exact rule.

Moving to Washington from a state with income tax

When you establish residency in Washington, you stop owing income tax to Washington State on future income. However, you may still owe income tax to your previous state for the portion of the year you lived there before moving. Most states tax you based on the number of days you were a resident during that tax year.

If you moved mid-year, you will file a part-year resident return with your former state, reporting only the income earned while you lived there. Your new employer in Washington will not withhold state income tax, but your old employer may have withheld tax for your former state. You can claim that withholding as a credit on your part-year return to avoid double taxation.

Self-employment and business income in Washington

If you are self-employed or own a business in Washington, you do not pay state income tax on your net profit. However, you may owe B&O tax depending on your gross revenue and business type. The threshold and rate vary — some sole proprietors with low revenue are exempt, while others must register and pay quarterly.

You will still owe federal self-employment tax (Social Security and Medicare) and federal income tax on your profit. Washington State's lack of income tax does not reduce your federal obligations. Check with the Washington Department of Revenue or a tax professional to determine whether your specific business owes B&O tax.

Frequently Asked Questions

Do I have to file a Washington State income tax return?

No. Washington does not require state income tax returns. You file only your federal return with the IRS. If you moved to Washington mid-year from another state, you file a part-year return with your former state for the months you lived there.

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

You typically owe income tax to the state where you work, which would be Washington. However, Washington has no income tax, so you owe nothing to Washington. You may owe income tax to Oregon on the same income. Check Oregon's rules on nonresident workers or consult a tax professional for your specific situation.

Does the capital gains tax explore to selling my house?

The capital gains tax generally does not explore to the sale of your primary residence. It applies to investment property and other real estate. If you are unsure whether your property qualifies for the exemption, contact the Washington Department of Revenue or speak with a tax professional.

Will I get a refund if Washington withheld state income tax by mistake?

If an employer withheld Washington State income tax, you can request a refund from the Washington Department of Revenue. File Form 1040 (Claim for Refund of Washington State Income Tax Withheld) with documentation showing the withholding. The department processes refunds, though the timeline varies.

What happens to my federal tax refund if I move to Washington?

Your federal tax refund is not affected by moving to Washington. You claim it on your federal return filed with the IRS. If you moved mid-year, your federal return covers the full year regardless of where you lived, and your refund is based on your total federal tax liability for that year.