Washington Tax Calculator
Washington Income Tax
Washington has no state income tax on wages, salaries, or most investment income. However, since 2022, Washington imposes a 7% capital gains tax on the sale of stocks, bonds, and other capital assets with gains exceeding $262,000 per year (indexed for inflation). This tax was upheld by the Washington Supreme Court in 2023, which classified it as an excise tax rather than an income tax.
Washington Sales Tax
Washington's state sales tax is 6.50%, with local taxes pushing the average combined rate to approximately 9.23%, one of the highest in the nation. Seattle's combined rate is approximately 10.25%. Washington does not have an income tax to offset this high sales tax burden. Groceries are exempt from state sales tax.
Washington Property Tax
Washington's effective property tax rate is approximately 0.92%, close to the national average. Property tax is the primary funding source for schools and local government. King County (Seattle) tends to have higher rates due to voter-approved levies.
Washington Capital Gains Tax
Enacted in 2021 and effective January 2022, Washington's capital gains tax is 7% on gains from the sale of stocks, bonds, and other capital assets exceeding $262,000 per year. Key details:
- Rate: 7% flat rate on gains over $262,000
- Threshold: $262,000 (indexed for inflation)
- Exemptions: Real estate sales, retirement accounts, livestock, timber, goodwill from small business sales (under certain conditions)
- Filing: Due April 15 with the Washington Department of Revenue
The tax was challenged in court but upheld by the Washington Supreme Court in March 2023 in Quinn v. State, which classified it as an excise tax on the privilege of selling capital assets rather than an income tax (which would be unconstitutional under Washington law).
Washington B&O Tax (Business & Occupation)
Instead of a corporate income tax, Washington imposes the Business & Occupation (B&O) tax, a gross receipts tax on virtually all business activity in the state. The rates vary by classification:
- Retailing: 0.471%
- Manufacturing: 0.484%
- Service: 1.50% (higher rate makes WA expensive for service businesses)
- Wholesaling: 0.484%
Because B&O tax is on gross receipts (not profit), it can be a significant burden for businesses with thin margins or those operating at a loss.
How Washington Funds Government Without Income Tax
Washington relies heavily on consumption taxes:
- Sales tax — The largest revenue source (avg 9.23% combined)
- B&O tax — Broad business gross receipts tax
- Property tax — Moderate rate (0.92%)
- Real estate excise tax (REET) — 1.1%-3% on property sales
- Capital gains tax — 7% on gains over $262,000 (new)
Washington vs. Oregon: The Pacific Northwest Tax Showdown
Washington and Oregon offer a fascinating contrast:
- Washington: No income tax, high sales tax (9.23% avg), moderate property tax (0.92%)
- Oregon: High income tax (4.75%-9.9%), NO sales tax, moderate property tax (0.87%)
For high earners, Washington is typically better. For retirees with low income but high spending, Oregon's no-sales-tax policy may be more beneficial. Many Portland-area residents live in Washington (Vancouver, WA) to avoid Oregon income tax while shopping in Oregon to avoid sales tax.