You’ve probably heard it a thousand times: "Washington has no income tax." It’s basically the state’s calling card. People move here from California or Oregon specifically to keep that extra chunk of their paycheck. But honestly, if you’re looking for a simple 1040-style tax bracket table for the Evergreen State, you're going to be looking for a while.
There aren't any. At least, not for your salary.
Washington is one of the few states that famously lacks a personal income tax on wages. But that doesn't mean the state doesn't have "brackets" or "tiers" in other ways. In fact, 2026 is shaping up to be a pretty weird year for anyone trying to track what they actually owe the Department of Revenue (DOR). Between the new tiered capital gains rates and the constant political tug-of-war in Olympia, the "no tax" reputation is getting a bit more complicated.
The Income Tax Myth and the Reality of 2026
Let’s be crystal clear: if you earn $100,000 a year at a software job in Bellevue, Washington state takes $0 of that in personal income tax. You still pay federal taxes to the IRS, of course. For 2026, those federal brackets start at 10% and go up to 37%, but the state of Washington stays out of your pocket.
However, "no income tax" isn't the same as "no taxes." Washington makes up for the lack of a paycheck tax by having some of the highest sales and excise taxes in the country. It’s a trade-off. You keep more of what you earn, but you pay more of what you spend.
The Millionaire's Tax Debate
As of early 2026, Governor Bob Ferguson and Democratic leadership in Olympia have been pushing what’s colloquially called the "Millionaire’s Tax." This would be a 9.9% tax on individuals earning more than $1 million per year. If it passes the current 60-day legislative session (which runs through March 2026), it would be the first real personal income tax in state history.
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But there's a catch. Even if they pass it today, legal experts like those at Holland & Knight point out that it’ll face immediate court challenges. Washington’s Constitution has historically been interpreted to treat income as "property," and property must be taxed at a flat rate (not to exceed 1%). To get a graduated 9.9% bracket to stick, the State Supreme Court would have to essentially rewrite a century of legal precedent.
The New 2026 Capital Gains Brackets
While your salary is safe for now, your investments might not be. This is where the "brackets" actually exist in Washington.
Starting with the 2025 tax year—which you are actually filing and paying for right now in early 2026—the state moved from a flat tax to a tiered system for long-term capital gains. It’s an excise tax, not an "income tax" (a distinction that survived a massive court battle in 2023).
Here is how the 2026 capital gains tiers break down:
- The 7% Tier: This applies to your first $1,000,000 of taxable Washington capital gains.
- The 9.9% Tier: Any gain above that $1 million mark gets hit with an extra 2.9% surcharge, bringing the total effective rate to 9.9%.
There’s a standard deduction, too. For 2025/2026, that's roughly $270,000 (adjusted for inflation). If you sell some stocks and make $200,000, you owe the state nothing. If you sell a business and clear $2 million, you’re going to be writing a very large check to Olympia.
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What’s Exempt? (The Stuff You Don't Pay On)
It’s not all doom and gloom for investors. Washington actually excludes a lot of things from this tax:
- Real Estate: Selling your house? Usually exempt.
- Retirement Accounts: Your 401(k) or IRA distributions aren't touched by the state.
- Family-Owned Small Businesses: There’s a massive deduction here—up to $3 million—if you’re passing down or selling a long-held family company.
Business and Occupation (B&O) Tiers
If you’re a business owner, you don't deal with "brackets" so much as "classifications." Washington’s B&O tax is notoriously complex because it’s based on gross receipts, not profit. You could be losing money and still owe the state thousands.
For 2026, there are some big changes to watch:
- The High Grossing Surcharge: If your business has Washington taxable income over $250 million, there’s a new 0.5% surcharge starting Jan 1, 2026.
- Service Activities: Most service businesses pay about 1.5% to 1.75%, depending on the size of the "affiliated group" they belong to.
- Small Business Credit: On the flip side, the state is trying to help the "little guy" by increasing credits that effectively zero out the tax for businesses making under $100,000 or so.
Why "No Tax" Can Feel Like "High Tax"
If Washington doesn't have income tax brackets, why does it feel so expensive to live here? It's the "regressive" nature of the system.
The Institute on Taxation and Economic Policy often ranks Washington as having one of the most regressive tax codes in the U.S. This basically means that people with lower incomes spend a much higher percentage of their earnings on taxes than the wealthy do.
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Think about it: the sales tax in parts of King County or Snohomish County can hover around 10% or higher. If you spend most of your paycheck on groceries (the taxable kind), clothes, and household goods, that 10% hurts. If you’re a billionaire and you spend a tiny fraction of your wealth on local goods, the sales tax is barely a rounding error.
The Working Families Tax Credit
To combat this, the state launched the Working Families Tax Credit (WFTC). For 2026, eligible families can get a refund of up to $1,330. It’s meant to give back some of that sales tax. You apply for this separately through the DOR after you file your federal return. It’s honestly one of the few ways to get a "negative" tax rate in Washington.
Actionable Steps for 2026
Navigating Washington's unique tax landscape requires a different playbook than other states. Since there are no standard income tax brackets to "climb," your strategy should focus on transaction timing and credits.
- Track Your Capital Gains Now: If you are planning to sell assets that will net you over $270,000, you need to look at the 7% vs 9.9% tiers. Selling a portion in 2026 and a portion in 2027 could save you that 2.9% surcharge if it keeps you under the million-dollar threshold each year.
- Check WFTC Eligibility: Even if you think you make "too much," check the DOR website. The income limits for the Working Families Tax Credit are higher than many realize, especially for larger households.
- Watch the Legislature in March: The 60-day session ends in March 2026. If the Millionaire's Tax passes, you may need to consult a pro about how "income" is being defined for high earners.
- B&O Filing Changes: If you run a high-revenue business, ensure your accounting software is updated for the new 0.5% surcharge that kicked in on January 1.
- IRS Disaster Relief: If you were affected by the winter storms in late 2025, remember that the IRS (and often the state) has extended certain filing deadlines to May 1, 2026. Don't rush if you don't have to.
Washington is a "low tax" state for some and a "high tax" state for others. Understanding that the "brackets" are hidden in sales, capital gains, and business receipts is the first step to actually keeping more of your money in the Pacific Northwest.