Washington Tax Guide: No Income Tax State

Tax Overview

Washington does not levy a traditional state income tax on wages, salaries, or most forms of personal income. However, the state enacted a 7% capital gains excise tax in 2021 on the sale of stocks, bonds, and other capital assets exceeding $250,000 per year (with exemptions for real estate, retirement accounts, and certain other assets). This tax was upheld by the state supreme court as an excise tax rather than an income tax.

Sales tax in Washington is significant, with a state rate of 6.5% and local additions that push the combined rate above 10% in some areas, particularly in Seattle (10.25%) and other major cities. Washington has one of the highest combined sales tax rates in the nation. Groceries are exempt from state sales tax, but prepared food, restaurants, and most other goods and services are taxable.

Property taxes in Washington are moderate, with effective rates around 0.92%. The state limits annual property tax increases to 1% plus new construction, and local voters must approve any increases above this level. Washington offers a property tax exemption for seniors and disabled individuals, as well as a deferral program that allows qualifying residents to defer property tax payments until they sell their home.