Washington does not have a state income tax
Washington State does not tax your wages, salary, or investment income. You will not file a state income tax return or pay state income tax on money you earn from a job. This is one of nine states in the country with no income tax at all.
However, Washington makes up that lost revenue through other taxes. You will pay sales tax, property tax if you own a home, and various other state and local fees. The overall tax burden depends on what you buy, where you live within the state, and whether you own property.
If you moved to Washington from a state with income tax, or you are considering the move, understanding what you will and will not pay helps you budget accurately.
Key Takeaways
- Washington State collects no income tax on wages, salaries, or most investment income, so you will not file a state return.
- Washington relies on sales tax instead, which ranges from 6.5% to 10.25% depending on the city and county where you make purchases.
- Property owners pay property tax to their county, and rates vary significantly — from roughly 0.7% to 1.1% of home value depending on location.
- You still file a federal income tax return with the IRS, because the federal government taxes income regardless of where you live.
- Some investment income, such as capital gains on the sale of stocks or real estate, may be subject to Washington's capital gains tax.
What you pay instead of income tax: sales tax
Washington State imposes a sales tax on most goods and some services. The state rate is 6.5%, but your actual rate depends on your city and county. Local jurisdictions add their own sales tax on top of the state rate, so the total can range from 6.5% to 10.25% depending on where you shop.
Sales tax applies when you buy items at a store, online (if the seller has a Washington presence), or at restaurants. Groceries are generally exempt, as are prescription medications. Clothing and shoes are also exempt in Washington, which is unusual — many states tax clothing.
Because sales tax is higher than income tax in many other states, your overall state tax burden may feel similar or even lower, depending on how much you spend versus how much you earn. A person who earns $60,000 and spends $40,000 per year will pay less total state tax in Washington than in a state with a 5% income tax.
Property tax if you own a home
If you own real estate in Washington, you pay property tax to your county each year. The rate varies by county and is calculated as a percentage of your home's assessed value. Most Washington counties charge between 0.7% and 1.1% of assessed value annually, though a few are higher or lower.
Your county assessor determines the assessed value of your home, which is often lower than the market value. The assessor reassesses property periodically, and the assessed value can increase, which raises your tax bill. Homeowners over 61 with limited income may be able to defer property taxes, though this is a loan against your home rather than a reduction.
Property tax bills are sent by your county treasurer, usually twice per year. If you have a mortgage, your lender may collect property tax as part of your monthly payment and pay it on your behalf.
Capital gains tax on investment sales
Washington State taxes capital gains — the profit you make when you sell stocks, bonds, real estate, or other investments. The capital gains tax applies only to long-term gains (investments held more than one year) on stocks and certain other securities. The tax rate is 7% on gains above $250,000 per year.
This tax does not explore to the sale of your primary home if you meet certain conditions, and it does not explore to retirement account withdrawals like 401(k) or IRA distributions. It also does not explore to gains on real estate held as rental property or investment land.
If you sell stocks worth $300,000 that you bought for $200,000, your gain is $100,000. If this is your only capital gain that year, you would not owe capital gains tax because the gain is below the $250,000 threshold. The threshold resets each year.
Federal income tax still applies
Even though Washington has no state income tax, you must still file a federal income tax return with the Internal Revenue Service (IRS). Federal income tax is collected by the U.S. government and applies to residents of all 50 states, regardless of whether your state has income tax.
Your federal return is due to the IRS by April 15 each year (or the next business day if April 15 falls on a weekend). You file this return separately from any state return — in Washington's case, there is no state return to file at all.
If you are self-employed or have income from sources other than a W-2 job, you may also owe federal self-employment tax, which funds Social Security and Medicare. This is separate from income tax and applies regardless of where you live.
Other Washington State taxes and fees
Beyond income, sales, and property tax, Washington collects revenue through several other sources. These include excise taxes on gasoline, alcohol, and tobacco; vehicle registration fees; and business and occupation (B&O) tax for self-employed people and business owners.
The gas tax in Washington is among the highest in the country and funds road maintenance and transportation projects. Alcohol and tobacco taxes are also significant. If you own a vehicle, you pay an annual registration fee to the Department of Licensing, which varies by vehicle type and age.
Self-employed people and small business owners pay B&O tax based on gross income in certain categories. The rate depends on the type of business — service and other activities are taxed at 1.5%, retailing at 0.471%, and wholesaling at 0.484%. This is in addition to federal self-employment tax.
How Washington's tax system compares to other states
Washington's lack of income tax makes it attractive to high earners, but the overall tax burden depends on spending and property ownership. A person who earns a high salary but spends little and rents rather than owns will pay very little state tax. A person who earns the same salary, spends heavily, and owns property will pay more.
States with income tax often have lower sales tax rates. For example, California has a state income tax of up to 13.3% but a sales tax of 7.25%. Oregon has income tax up to 9.9% but no sales tax. The choice of where to live involves trade-offs, not a straightforward "lower tax" answer.
If you are moving to Washington or comparing it to another state, calculate your likely tax bill based on your own situation: your income, how much you spend, and whether you own property. That gives you a more accurate picture than comparing tax rates alone.
Frequently Asked Questions
Do I have to file a Washington State tax return?
No. Washington has no state income tax, so you do not file a state return. You still file a federal return with the IRS if you meet the income thresholds set by the federal government.
Will I owe capital gains tax on the sale of my house?
Usually not. The capital gains tax exemption covers the sale of your primary residence if you meet certain conditions, including that you owned and lived in the home for at least two of the last five years. Consult a tax professional if your situation is complex or if you own multiple properties.
What is the sales tax rate where I live?
Sales tax varies by city and county. You can find your local rate on your county assessor's website or by searching "[your city] sales tax rate." The state rate is 6.5%, but local additions can bring the total to 10.25% or higher.
Do I pay property tax on rental income from a property I own?
You pay property tax on the assessed value of the property itself, not on the rental income. Rental income is subject to federal income tax. You may also owe capital gains tax if you sell the property at a profit.
Is there a state tax on retirement account withdrawals?
No. Withdrawals from 401(k), IRA, and similar retirement accounts are not subject to Washington State tax. They are subject to federal income tax, and you may owe penalties if you withdraw before age 59½.