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 owe state income tax on what you earn. This is one of the few states in the country with no income tax at all.

However, Washington does collect tax revenue 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 pay—and what you don't—matters when you're budgeting or planning a move to the state.

Key Takeaways

  • Washington State has no personal income tax on wages, salaries, or self-employment income.
  • Washington charges a state sales tax of 6.5 percent, plus local sales taxes that vary by county and city.
  • Property owners pay property tax to their county, with rates varying significantly depending on location.
  • Certain capital gains—profits from selling stocks or investment property—are taxed at 7 percent if you meet income thresholds.
  • Federal income tax still applies to all Washington residents, regardless of the state's lack of income tax.

Sales Tax Is Washington's Largest Tax on Residents

Washington's state sales tax rate is 6.5 percent on most purchases. However, your total sales tax bill depends on where you shop, because cities and counties add their own local sales taxes on top of the state rate. In some areas, the combined rate reaches 10 percent or higher.

Sales tax applies to most goods—clothing, groceries, electronics, and household items. A few categories are exempt: prescription medications, most food bought at grocery stores (but not prepared food or restaurant meals), and certain medical equipment. When you buy something in Washington, the tax is added at the register.

Because Washington relies on sales tax instead of income tax, residents with higher incomes often pay a smaller percentage of their earnings in state tax than residents in states with income tax. Conversely, lower-income residents may pay a larger share of their income in sales tax, since they spend more of what they earn on taxable goods.

Property Tax Varies Widely by County

If you own property in Washington, you owe property tax to your county. The tax is calculated as a percentage of your home's assessed value, but the rate differs significantly depending on which county you live in. Some counties charge around 0.7 percent of assessed value annually, while others charge closer to 1 percent or slightly higher.

Your county assessor determines the assessed value of your property, which is not always the same as the price you paid or the current market value. Assessments are updated periodically, and you have the right to appeal if you believe the assessment is too high. Property tax bills are typically due once or twice per year, depending on your county's schedule.

Capital Gains Tax Applies to Investment Profits Above a Threshold

Washington enacted a capital gains tax in 2021 that applies to long-term capital gains—profits from selling stocks, bonds, real estate, or other investments held for more than one year. The tax rate is 7 percent on gains above $250,000 per person per year. If your investment gains fall below that threshold, you owe no state capital gains tax.

This tax does not explore to retirement accounts like 401(k)s or IRAs, nor does it explore to the sale of your primary residence. It also does not explore to short-term capital gains (investments held for one year or less), which are treated as ordinary income and therefore not taxed by Washington State.

Federal Income Tax Still Applies to All Residents

Even though Washington State has no income tax, you still owe federal income tax on your earnings. The federal government taxes income regardless of which state you live in. Your federal tax rate depends on your income level and filing status, and you report federal taxes on your annual Form 1040 to the Internal Revenue Service.

If you work for an employer, federal income tax is withheld from your paycheck automatically. If you are self-employed or have other income sources, you may need to make quarterly estimated tax payments to the federal government. State income tax and federal income tax are separate obligations.

Business and Excise Taxes Fund State Operations

Washington collects revenue from businesses through a Business and Operations Tax (B&O tax), which is based on gross revenue rather than profit. Different business types pay different rates—manufacturers pay around 1.5 percent, wholesalers around 1.75 percent, and retailers around 0.471 percent. Service and other activities are taxed at 1.5 percent.

The state also collects excise taxes on specific goods: gasoline, cigarettes, alcohol, and recreational marijuana all carry additional state excise taxes beyond the regular sales tax. These taxes are built into the price you see at the pump or store shelf.

How Washington's Tax System Compares to Other States

Nine states have no personal income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes only investment income). States without income tax typically rely more heavily on sales tax, property tax, and business taxes to fund government operations.

If you are moving to Washington from a state with income tax, you will not owe state income tax on your wages—a significant change. However, you may notice higher sales tax on everyday purchases and property tax if you own a home. The overall tax burden depends on your individual situation: how much you earn, how much you spend, and whether you own property.

Frequently Asked Questions

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

No. Washington State does not require residents to file a state income tax return because there is no state income tax. You still must file a federal income tax return with the IRS if your income exceeds the federal threshold for your filing status.

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

No. Since Washington has no income tax, you do not owe Washington State tax on wages earned there. You may owe income tax to the state where you live, depending on that state's rules. Some states tax residents on income earned anywhere, while others only tax income earned within the state.

Are groceries taxed in Washington?

Most unprepared food bought at grocery stores is exempt from sales tax in Washington. However, prepared foods—deli items, hot food, restaurant meals, and food from food trucks—are taxed at the full sales tax rate. Alcohol and tobacco are always taxed.

What happens if I sell my house in Washington—do I pay capital gains tax?

No. The sale of your primary residence is exempt from Washington's capital gains tax. The 7 percent capital gains tax applies only to investment property and other investments like stocks and bonds, and only if your gains exceed $250,000 in a single year.

Does Washington tax retirement income like Social Security or pensions?

No. Washington State does not tax Social Security benefits, pensions, or retirement account withdrawals. Since the state has no income tax, retirement income is not subject to state taxation. You may still owe federal income tax on some types of retirement income, depending on your total income and the source.