You’ve probably heard the rumor. People move to the Pacific Northwest specifically to dodge taxes. It’s the "no income tax" dream, right?
Well, kinda.
While it's true that your paycheck doesn't get hit by a state-level income tax, the government still has bills to pay. Washington is actually famous—or maybe infamous—for having one of the most unique tax structures in the country. They don't take it from your salary, but they sure find other ways to get it.
If you are trying to figure out what is the tax rate in washington state, you have to look at the whole puzzle. It’s not just one number. It’s a mix of sales tax, property tax, and some very specific "excise" taxes that might surprise you.
The Sales Tax Situation Is... A Lot
Let's start with the big one. Since there’s no income tax, the state relies heavily on you buying stuff.
The base state sales tax rate is 6.5%.
But you will almost never actually pay just 6.5%. Why? Because local governments (cities and counties) add their own slice on top. In places like Seattle, Lynnwood, and Edmonds, the combined rate has hit a staggering 10.55% to 10.7% in 2026.
Honestly, it’s one of the highest in the nation.
If you’re buying a $50,000 truck in King County, you’re looking at over $5,000 just in tax. That stings. However, there is a silver lining: Washington doesn't charge sales tax on most "unprepared" groceries. If you're buying raw chicken and broccoli, you're good. If you're buying a rotisserie chicken that's already hot? Yeah, you're paying the tax.
What Is The Tax Rate In Washington State For Businesses?
If you're running a business, forget everything you know about corporate income tax. Washington doesn't have that either. Instead, they use the Business and Occupation (B&O) tax.
This is where it gets tricky for entrepreneurs.
The B&O tax is based on gross receipts. That means you pay based on the total money coming in, even if your business is losing money that month. The rates vary wildly depending on what you do:
- Retailing: 0.471%
- Wholesaling/Manufacturing: 0.484%
- Service and Other Activities: 1.5% (for those making over $1 million)
Starting January 1, 2026, there is even a new surcharge. If your business is a "high-grossing" entity with taxable income over $250 million, there is an extra 0.5% surcharge. It’s basically the state’s way of asking the biggest players to chip in a bit more for the budget.
The Capital Gains Controversy
This is the one everyone is talking about at dinner parties in Bellevue.
For a long time, Washington had zero tax on investment gains. That changed recently. There is now a 7% tax on the sale of long-term capital assets (like stocks and bonds) if your gains exceed $250,000 in a year.
But wait, there’s a 2026 twist.
New tiered rates have kicked in. Now, if your gains exceed $1 million, the rate jumps to 9.9% on the amount over that million-dollar mark. The state calls this an "excise tax" to keep it legal under the state constitution, but most folks see it as a targeted income tax on the wealthy.
Property Taxes and the 1% Rule
You’d think with high sales tax, property taxes would be low. Nope. They’re pretty average, but because home values in the Seattle metro area are through the roof, the actual dollar amount feels massive.
Washington has a "1% levy growth limit." This doesn't mean your tax can't go up more than 1%. It means the total amount a taxing district collects can't grow by more than 1% per year without a vote from the people.
In 2026, the inflation factor (IPD) for property taxes was set at 2.44%, but the limit factor remains at 101% (or 1%) for most districts. If you see your bill spike by 10%, it's usually because your neighbors voted for a new school bond or a fire department levy.
The Hidden Payroll Taxes
Even though there’s no "income tax," your paycheck still looks a little lighter thanks to two specific programs:
- Paid Family and Medical Leave (PFML): The rate for 2026 has climbed to 1.13%.
- WA Cares Fund: This is the long-term care insurance tax, which is 0.58% of your total wages.
There is no cap on the WA Cares tax. If you make $500,000, you’re paying 0.58% on every single dollar.
Estate Taxes: The "Death Tax" Warning
Washington has one of the most aggressive estate taxes in the US. If you pass away in 2026, the exemption threshold is roughly $3.076 million.
Anything over that amount gets taxed at rates between 10% and 20%.
For a family that owns a home in a nice neighborhood and a modest 401k, hitting that $3 million mark is easier than you’d think. Many residents are moving to Idaho or Florida just to avoid this specific hit to their inheritance.
🔗 Read more: Mortgage Rates July 3 2025: Why Most Buyers Are Getting It Wrong
Practical Steps for 2026
If you're living in or moving to Washington, here is how to handle this landscape:
- Watch the City Lines: Buying a car? Check the rates in the next town over. A 1% difference on a big purchase is real money.
- Track Your B&O: If you're a freelancer, remember you're taxed on revenue, not profit. Set aside 1.5% of every check so you aren't scrambled at tax time.
- Review Your Estate: If your net worth (including your home) is approaching $3 million, talk to a pro about "Qualified Family-Owned Business" deductions or trusts.
- Capital Gains Planning: If you’re planning to sell a lot of stock, consider doing it over two years to stay under the $250,000 or $1,000,000 thresholds.
Washington is a beautiful place to live, and the lack of a traditional income tax is great for high earners. Just don't let the sales and excise taxes catch you off guard.
For the most accurate local data, you can always check the Washington Department of Revenue website, which stays updated on the specific local rate increases that happen every April and October.