Capital gains: No wage income tax. Capital gains tax of 7% above an annual standard deduction (about $278,000 in 2026 per Tax Foundation) and 9.9% on gains above $1 million (SB 5813, from tax year 2025); QSBS gains remain excluded.
What changed: ESSB 6346, signed March 30, 2026, imposes a 9.9% tax on income above $1 million from Jan. 1, 2028; it faces a constitutional lawsuit.
| May 20, 2025 | Washington SB 5813: higher capital gains and estate taxes Adds a 2.9% tier so gains above $1 million are taxed at 9.9%. Raised the estate exemption to $3 million while lifting the top estate rate to 35%. | In effect |
| March 24, 2026 | Washington SB 6347: estate tax top rate rolled back Returns the top estate tax rate from 35% to 20% while keeping the $3 million exemption. Inflation indexing of the exemption is left uncertain, which matters for Washington estates above $3 million. | Enacted |
| March 30, 2026 | Washington ESSB 6346: 9.9% tax on income above $1 million Washington's first broad income tax: 9.9% on income above a $1 million deduction, shared by married couples, with credit for capital gains tax paid. A constitutional challenge was filed in April 2026, and the state Supreme Court blocked a referendum in May. | Litigation |
Washington public-sector unions are spending heavily to preserve the state’s new 9.9% tax on household earnings above $1 million ahead of the November vote on Initiative 645.
A Fortune analysis found billionaires who left California for Florida ahead of a proposed wealth tax may have taken roughly $29 billion in potential state revenue with them, a case study in domicile timing.
In Lewis v. Commissioner, the court rejected both the IRS's $53.4 million figure and the family's $156,000 claim, holding that state law and an avoided tax-reimbursement duty set the value.
A new law would end Washington's status as an income-tax-free state for top earners starting in 2028, layering a 9.9% levy on top of the state's existing capital gains tax.
California's combined top marginal rate reaches 14.4% and NYC residents face up to 14.776%, even as Georgia, Indiana, Kentucky and six other states cut income tax rates on January 1.
A bipartisan 38-11 vote sends a bill undoing last year's rate increase toward the House, with the lower rate applying only to deaths on or after July 1, 2026.
Smaller Washington estates now owe less, but estates above roughly $9 million pay more under a schedule that tops out at the highest state estate tax rate in the country.