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

Washington is one of nine states with no tax on personal income. You will not owe Washington state income tax on wages, salary, interest, dividends, or retirement distributions. If you work in Washington or live there, you do not file a state income tax return to the state.

However, Washington funds state services through other taxes. You will pay sales tax, property tax if you own real estate, and business-and-occupation tax if you are self-employed or own a business. The state also taxes capital gains above a certain threshold, though this applies to a small number of residents.

Federal income tax still applies. Even though Washington has no state income tax, you must file a federal return with the IRS if your income exceeds the federal threshold for your filing status.

Key Takeaways

  • Washington collects no state income tax on wages, salaries, or most investment income, so you do not file a state income tax return.
  • Washington funds state government through sales tax (currently 6.5 percent statewide, higher in some counties), property tax, and business taxes.
  • If you are self-employed or own a business in Washington, you owe business-and-occupation tax to the state, which is separate from federal self-employment tax.
  • Capital gains tax applies only to long-term capital gains above $250,000 in a single year, affecting a small portion of residents.
  • You still file a federal income tax return with the IRS if your income meets the federal threshold, even though Washington has no state income tax.

What taxes Washington residents and workers do pay

Washington's main source of state revenue is sales tax. The state sales tax rate is 6.5 percent, but most counties add a local sales tax on top of that. Your total sales tax can range from 6.5 percent to over 10 percent depending on where you shop. Sales tax applies to most goods and some services, though groceries and prescription medications are exempt.

Property tax applies if you own a home, land, or other real estate in Washington. The state does not set a single property tax rate; instead, each county and local taxing district sets its own rate. Property tax bills vary widely by location. You receive a property tax statement from your county assessor each year.

If you are self-employed or own a business, you owe Washington's business-and-occupation tax, commonly called B&O tax. This is a gross receipts tax — you pay it on your total business income before expenses, not on profit. The rate depends on your business classification and ranges from 0.471 percent to 1.75 percent. You file B&O tax returns with the Washington Department of Revenue, separate from your federal self-employment tax.

Capital gains tax in Washington

Washington taxes long-term capital gains, but only for gains above $250,000 in a single calendar year. Long-term capital gains are profits from selling stocks, real estate, or other investments you held for more than one year. The tax rate is 7 percent on gains above the $250,000 threshold.

Most residents do not owe this tax because the threshold is high. If you sell a rental property or investment account and your profit is under $250,000, you owe nothing to Washington. If your gain exceeds $250,000, you report it to the Washington Department of Revenue on Form WA-1040-CG.

You still owe federal capital gains tax regardless of whether you owe Washington's tax. The federal rate depends on your income level and filing status.

How to handle federal taxes while living or working in Washington

Even though Washington has no state income tax, you must file a federal return with the IRS if your income exceeds the federal threshold. For 2024, that threshold is $14,600 for single filers under 65, $29,200 for married filing jointly under 65, and higher amounts for older filers. The threshold changes each year.

You file your federal return using Form 1040 and any supporting schedules your situation requires. If you are self-employed, you also file Schedule SE to calculate federal self-employment tax. You do not file a state return to Washington, which simplifies your filing process compared to residents of states with income tax.

If you work in Washington but live in another state, or vice versa, you may owe tax to both states. Contact the other state's tax department to learn whether you must file there. Some states have reciprocal agreements that prevent double taxation on wages.

If you moved to Washington from another state

When you move to Washington from a state with income tax, you do not owe Washington income tax on income earned after your move date. However, you may still owe tax to your former state on income earned while you lived there. Your former state may require you to file a part-year return.

Contact your former state's tax department to learn the filing important date and whether you must report the move. Some states consider you a resident until you establish residency elsewhere, which can extend your filing obligation. Keep documentation of your move — a lease, utility bill, or driver's license change — in case either state questions your residency.

Washington tax forms and where to file

Because Washington has no income tax, you do not need a state income tax form. If you owe B&O tax, you file Form WA-1040-BZ or Form WA-1040-S (for sole proprietors) with the Washington Department of Revenue. If you owe capital gains tax, you file Form WA-1040-CG. All forms are available on the Department of Revenue website.

You file federal forms with the IRS. Use Form 1040 for your main return, Schedule C if you are self-employed, and Schedule SE to calculate self-employment tax. File electronically through IRS Free File if you may have access to, or through a tax software provider or tax professional.

The federal filing important date is April 15 each year, unless that date falls on a weekend or holiday. Washington does not extend the important date for state filing because there is no state return, but the federal important date still applies.

Frequently Asked Questions

Do I have to file anything with Washington state if I work there?

No state income tax return is required. If you are self-employed or own a business, you file B&O tax forms with the Washington Department of Revenue. If you sold investments for a gain over $250,000, you file Form WA-1040-CG. Otherwise, you file only your federal return with the IRS.

What is the sales tax rate in Washington?

The state sales tax is 6.5 percent, but most counties add local sales tax on top of that. Your total rate depends on where you make the purchase. Check the Washington Department of Revenue website or your county assessor's office for your specific rate.

If I own a rental property in Washington, do I owe state income tax on the rent?

No. Washington does not tax rental income. You do not owe Washington state income tax on rent you collect. You still owe federal income tax on that rental income, and you may owe property tax on the building itself.

Does Washington tax retirement income or Social Security?

No. Washington does not tax retirement distributions from IRAs, 401(k)s, pensions, or Social Security benefits. You do not owe Washington state tax on these income sources. Federal tax may explore depending on your total income and filing status.

What happens if I owe B&O tax but do not file?

The Washington Department of Revenue can assess penalties and interest on unpaid B&O tax. If you think you owe B&O tax, contact the Department of Revenue to learn your filing requirements and set up a payment plan if needed. Penalties increase the longer the debt goes unpaid.