Washington State Does Not Have a State Income Tax

Washington State does not tax wages, salaries, or most other forms of personal income. If you work in Washington or live there, you will not file a state income tax return or owe state income tax on what you earn. This is one of nine states in the country with no income tax on individuals.

However, Washington does collect taxes in other ways. The state relies heavily on sales tax, property tax, and business taxes to fund schools, roads, and public services. Understanding what you do and do not owe in Washington is straightforward once you know where the state actually collects revenue.

Key Takeaways

  • Washington State has no income tax on wages, salaries, or investment income, so you will not owe state income tax regardless of how much you earn.
  • Washington's sales tax rate ranges from 6.5% to 10.25% depending on your county, and applies to most goods and some services.
  • Property owners pay property tax to their county, with rates varying by location and set by local assessors.
  • If you are self-employed or own a business, you may owe Washington's Business & Operations Tax (B&O tax) depending on your gross income and business type.
  • You still file a federal income tax return with the IRS even though Washington has no state income tax.

What Taxes Washington State Does Collect

Sales tax is Washington's largest source of tax revenue. The state sales tax rate is 6.5%, but your county or city may add local sales tax on top of that. The total rate you pay ranges from 6.5% to 10.25% depending on where you shop. Sales tax applies to most physical goods—groceries, clothing, electronics, furniture—and to some services like restaurant meals and hotel stays.

Property tax is collected by counties and funds schools and local government. If you own a home or land in Washington, your county assessor determines the assessed value, and you pay tax based on that value. Property tax rates vary by county and by what the property is used for. Renters do not pay property tax directly, but landlords pass the cost along through rent.

Business & Operations Tax (B&O tax) applies if you are self-employed or own a business. The rate depends on your type of business and your gross income. Sole proprietors, partnerships, and corporations all may owe this tax. If your business income is below a certain threshold (which varies by business classification), you may not owe it.

Federal Income Tax Still Applies

Even though Washington has no state income tax, you still owe federal income tax to the IRS. You file a federal return each year if your income exceeds the threshold set by the IRS—currently around $13,850 for a single person and $27,700 for a married couple filing jointly, though these amounts change yearly.

Your federal tax rate depends on your income level and filing status. The federal government taxes income in brackets, meaning different portions of your income are taxed at different rates. You can use the IRS website or a tax software to calculate what you owe, or you can work with a tax professional.

Who Pays B&O Tax and How Much

The Business & Operations Tax is a gross receipts tax, meaning you pay it on the total money your business brings in before expenses. The rate ranges from 1.5% to 1.75% depending on your business classification. Washington groups businesses into categories: retailing, wholesaling, manufacturing, and service and other activities.

If your gross income is under $1,200 per year, you are generally exempt from B&O tax. However, some business types have different thresholds. You can find your business classification and rate on the Washington Department of Revenue website. If you are unsure whether you owe this tax, the department offers a tax classification tool to help you determine your status.

Self-employed people—freelancers, contractors, consultants—typically fall into the "service and other activities" category. You report your gross income and pay the tax when you file your annual B&O tax return with the state.

Capital Gains Tax in Washington

Washington enacted a capital gains tax in 2021 that applies to long-term capital gains over $250,000 in a single year. This tax is 7% and applies only to gains from selling stocks, bonds, real estate (other than your primary home), and similar investments. If your gains are under $250,000 or you do not sell investments, you do not owe this tax.

The capital gains tax is separate from income tax. It does not explore to wages or business income—only to investment gains. If you sell your primary residence, those gains are exempt. If you are unsure whether a sale triggers this tax, a tax professional or the Department of Revenue can clarify your situation.

Sales Tax Rates by County

Washington's base sales tax is 6.5%, but most counties add local tax. The combined rate you pay depends on where you make the purchase. Some counties are at 8.5%, others at 9% or higher. A few examples: King County (Seattle area) is 10.25%, Snohomish County is 10.25%, Spokane County is 8.9%, and Clark County (Vancouver area) is 8.6%.

When you shop, the sales tax is added at checkout. Groceries are generally exempt from sales tax in Washington, as are prescription medications and some medical equipment. Restaurant meals and prepared foods are taxed. If you buy something online from a retailer with a physical presence in Washington, sales tax applies. If you buy from an out-of-state retailer with no Washington location, you may owe use tax (a similar tax on purchases made outside the state), though this is rarely enforced for individual purchases.

How to Report B&O Tax and Other Business Taxes

If you owe B&O tax, you file a return with the Washington Department of Revenue. The return is due on the 25th of the month following the end of your tax year. Most businesses use a calendar year (January through December), so the return would be due January 25th. You can file online through the Department of Revenue's portal or by mail.

You will need your business license number and your gross income for the reporting period. The Department of Revenue provides worksheets and instructions on their website. If you hire an accountant or bookkeeper, they can handle this filing for you. If you are unsure about your filing important date or what to report, contact the Department of Revenue directly—they have a customer service line and email support.

Frequently Asked Questions

Do I have to file a state income tax return in Washington?

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 your income is above the federal threshold, but there is no Washington State income tax return to file.

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

You do not owe Washington income tax because Washington has no income tax. You owe income tax to your state of residence. If your home state has income tax, you file there. If you live in another no-income-tax state, you owe no state income tax at all.

What if I move to Washington from a state with income tax?

You stop owing income tax to your former state once you establish residency in Washington. You may owe part-year tax to your old state for the months you lived there. Contact that state's tax agency about filing a final return. You do not owe Washington income tax because it does not have one.

Does Washington tax retirement income or Social Security?

No. Washington does not tax Social Security benefits, pensions, or retirement account withdrawals because it has no income tax. You may owe federal tax on some retirement income depending on your total income and the type of account, but Washington collects nothing.

Is there a state estate tax or inheritance tax in Washington?

Washington does not have an inheritance tax. It does have an estate tax on estates over $2.193 million (this threshold changes yearly). The estate tax is paid by the estate itself before money is distributed to heirs, not by the people who inherit. Most estates are below this threshold and owe no tax.