Washington has no state income tax on wages or salaries

Washington State does not tax the wages, salaries, or tips you earn from a job. You will not file a state income tax return for work income, and your employer will not withhold state income tax from your paycheck the way they do for federal taxes.

This is one of the few states in the nation with no broad income tax. It means your take-home pay from employment is higher than it would be in states that do tax wages. However, Washington funds its state government through other taxes — primarily sales tax, property tax, and business taxes — so the overall tax burden works differently than in states with income tax.

If you moved to Washington from another state or are planning to move here, this is a significant change in how your taxes work. You may still owe federal income tax and taxes to your previous state, depending on when you moved and how your income was earned.

Key Takeaways

  • Washington State does not tax wages, salaries, or tips from employment, so you will not file a state income tax return for work income.
  • You still owe federal income tax to the IRS, and your employer will withhold federal taxes from your paycheck as usual.
  • Washington funds state services through sales tax (currently 6.5% statewide, higher in some counties), property tax, and business taxes instead.
  • If you earned income in another state before moving to Washington, you may owe that state's income tax for the portion of the year you lived there.
  • Certain types of income — such as capital gains over a threshold — may be subject to Washington's capital gains tax, which is separate from wage income.

What income Washington does not tax

Washington does not tax wages, salaries, hourly pay, tips, bonuses, commissions, or any other form of compensation for work. This applies whether you are an employee, self-employed, or a contractor. You will not see a line on any Washington State tax form for employment income because the state does not collect it.

This also means you do not have to file a state income tax return in Washington for work income alone. If your only income is from a job, you have no state filing requirement in Washington — though you will still file a federal return with the IRS if your income exceeds the federal threshold.

Retirement income from pensions and distributions from retirement accounts like 401(k)s and IRAs is also not taxed by Washington State. If you are retired and living on pension payments or withdrawals from retirement savings, Washington does not tax that income.

What Washington does tax: capital gains

Washington State has a capital gains tax that applies to the sale of long-term investments, but only on gains above a certain threshold. As of 2024, the tax applies to capital gains over $250,000 in a single year. The tax rate is 7% on the portion of gains above that threshold.

Capital gains are the profit you make when you sell an investment — such as stocks, bonds, real estate (other than your primary home), or collectibles — for more than you paid for it. If you buy a stock for $10,000 and sell it for $15,000, your capital gain is $5,000.

Your primary home is exempt from this tax. If you sell your house and make a profit, that gain is not subject to Washington's capital gains tax. The exemption applies to the home where you live, not to investment properties or vacation homes.

Most people do not hit the $250,000 threshold in a single year, so this tax affects a smaller portion of the population. If you do have significant investment income or are planning a large sale, it is worth understanding how this threshold works for your situation.

Federal income tax still applies in Washington

Even though Washington State has no income tax, you still owe federal income tax to the IRS. Your employer will withhold federal taxes from your paycheck, and you will file a federal return with the IRS each year if your income exceeds the federal threshold.

The federal tax system is separate from state taxes. The IRS collects federal income tax regardless of where you live. Washington's lack of state income tax does not change your federal obligation — it only means you have one less tax return to file and one less withholding on your paycheck.

If you are self-employed in Washington, you will still owe federal self-employment tax (Social Security and Medicare taxes) and federal income tax on your net business income. You will file Schedule C with your federal return, but you will not file a corresponding state form because Washington does not tax business income from self-employment.

Moving to Washington from another state

If you moved to Washington during the year from a state that has income tax, you may owe that state's income tax for the portion of the year you lived there. Most states tax income earned while you were a resident, even if you move away partway through the year.

When you move, you typically file a part-year resident return with your previous state, reporting only the income you earned while you lived there. You will also file a part-year resident return with Washington (though Washington has no income tax, some states require a form to document your move). The key is to report your move date accurately so each state taxes only the income earned during the time you were a resident.

If you moved from a state with no income tax — such as Texas, Florida, or Nevada — you have no state income tax obligation for either state. You will only owe federal taxes.

How Washington funds state services without income tax

Washington relies on sales tax as its primary source of state revenue. The statewide sales tax rate is 6.5%, but many counties and cities add local sales taxes on top of that, bringing the total to 8% to 10.25% depending on where you shop. Sales tax is collected on most goods and some services.

Washington also collects property tax, which is assessed on real estate and collected by counties. Property tax rates vary by county and are based on the assessed value of your property. This is how local schools, fire departments, and other services are primarily funded.

The state also taxes businesses through a Business and Operations Tax (B&O tax), which is a gross receipts tax on business income. Different business activities are taxed at different rates. Additionally, Washington collects excise taxes on specific items like gasoline, alcohol, and tobacco.

This combination of sales, property, and business taxes generates the revenue Washington uses for state services. The result is that Washington residents pay taxes, but through different mechanisms than states with income tax.

Self-employment and business income in Washington

If you are self-employed or own a business in Washington, you do not pay Washington State income tax on your business income. However, you will still owe federal self-employment tax and federal income tax on your net profit.

You may owe Washington's B&O tax if your business gross income exceeds the threshold for your business classification. The B&O tax is based on gross revenue (not net profit), and the rate depends on what type of business you operate — retailing, wholesaling, manufacturing, or service and other activities each have different rates. If your business is very small, you may fall below the threshold and not owe B&O tax.

When you file your federal return, you will report your business income on Schedule C (for sole proprietors) or the appropriate business form. You will not file a corresponding Washington State form for income tax purposes, but you may need to file a B&O tax return if your gross income is high enough.

Frequently Asked Questions

Do I need to file a Washington State income tax return?

No, if your only income is from wages or salary. Washington has no income tax on employment income, so you will not file a state return for work income. You will still file a federal return with the IRS if your income exceeds the federal threshold. If you have capital gains over $250,000 in a year, you may need to file a state form to report that.

Will my employer withhold Washington State income tax from my paycheck?

No. Your employer will withhold federal income tax, Social Security tax, and Medicare tax, but not Washington State income tax because the state does not tax wages. Your paycheck will reflect only federal withholdings and any local taxes your employer is required to collect.

What if I moved to Washington partway through the year?

You will file a part-year resident return with the state you moved from, reporting only income earned while you lived there. That state will tax you for the portion of the year you were a resident. Washington will not tax your income because it has no income tax, but you may file a form to document your move date.

Do I owe capital gains tax if I sell my house?

No. Your primary home is exempt from Washington's capital gains tax. If you sell the house where you live and make a profit, that gain is not taxed by Washington. Investment properties and vacation homes are not exempt.

Is Washington's lack of income tax the same as having no taxes?

No. Washington has no income tax, but it collects sales tax (6.5% statewide, higher in many areas), property tax on real estate, and business taxes. The overall tax burden depends on how much you spend, what property you own, and whether you run a business.