Washington state has no income tax on wages or salaries: one of nine states without a personal income tax. However, Washington does impose a capital gains excise tax on long-term gains: after a $278,000 standard deduction (tax year 2025), 7.00% on the first $1,000,000 of taxable gains and 9.90% on taxable gains above $1,000,000 (ESSB 5813, effective TY2025).Washington also has two mandatory payroll programs: PFML (1.13% total for 2026, up from 0.92% in 2025) and WA Cares Fund (0.58% of all wages, uncapped).
Income Tax (Wages)
None (0%)
Capital Gains Excise Tax
7.00% / 9.90% above $1M
PFML (Employee Share)
0.81% (total 1.13%)
WA Cares Fund
0.58%: uncapped
Washington Has No Income Tax on Wages
Washington state does not tax wages, salaries, tips, or ordinary income. There is no withholding for state income tax on Washington employee paychecks. Washington funds state government through sales tax (among the highest combined rates nationally), the Business & Occupation (B&O) tax on businesses, property tax, and since 2022, a capital gains excise tax.
Washington Capital Gains Excise Tax (Tax Year 2025 Figures)
Washington imposes an excise tax on long-term capital gains (assets held more than one year) above an annually adjusted standard deduction. The tiered rate structure (enacted by ESSB 5813, Ch. 421, Laws of 2025) applies to tax year 2025 (returns due 2026) and later:
Long-term capital gains (tax year 2025)
Rate
First $278,000 of gains (standard deduction)
0%: exempt
First $1,000,000 of taxable gains after the deduction
7.00%
Taxable gains above $1,000,000
9.90% (7.00% + 2.90% additional tax)
The $278,000 standard deduction is the tax year 2025 amount confirmed by the Washington DOR. It is adjusted for inflation each year, and DOR must publish the tax year 2026 amount by December 31, 2026 (RCW 82.87.150); this page will be updated then. The $1,000,000 tier is set in RCW 82.87.040 and is not indexed for inflation. Real estate, retirement account assets, and gains excluded from the federal return (including qualifying QSBS exclusions) are not subject to this tax. Short-term capital gains are not taxed at the state level.
Washington PFML 2026 – Significant Rate Increase
Washington Paid Family & Medical Leave (PFML) premium rates increased significantly for 2026. The total premium is 1.13% of wages up to the Social Security wage base, up from 0.92% in 2025 and 0.74% in 2024. Employees pay 0.81%; employers with 50 or more employees pay 0.32%. Employers with fewer than 50 employees are exempt from the employer share but must still collect and remit the employee portion.
WA Cares Fund (Long-Term Care) 2026
The WA Cares Fund is Washington's mandatory long-term care insurance program. Employees contribute 0.58% of all gross wages: there is no wage base cap, unlike PFML. Employers do not contribute to WA Cares. The program began paying benefits statewide on July 1, 2026. Employees who obtained qualifying private long-term care insurance before November 1, 2021 and applied for exemption are not required to contribute.
Washington Sales Tax 2026
Washington's state sales tax rate is 6.50%. Local rates range from approximately 0.5% to 4%, among the highest combined rates in the nation. Food and food ingredients for home consumption are exempt from Washington sales tax. Prepared foods, dietary supplements, soft drinks, and candy are taxable.
OBBBA Tips and Overtime in Washington
Washington has no income tax on wages. OBBBA deductions for tips, overtime, and senior income reduce federal taxable income only. There is no Washington state income tax from which these deductions could provide benefit.
No. Washington has no state income tax. Workers in Washington pay federal income tax and FICA (Social Security and Medicare) on wages, but owe nothing to the state on earned income.
Does Washington have a state income tax on wages?
No. Washington state has no income tax on wages, salaries, or ordinary income. Washington is one of nine states with no personal income tax on earned income. However, Washington does impose a capital gains excise tax on long-term capital gains above an annual standard deduction ($278,000 for tax year 2025; details below).
What is Washington's capital gains excise tax?
Washington imposes a tiered excise tax on long-term capital gains (LTCG) above the annual standard deduction threshold. For tax year 2025 (returns due 2026), the exemption threshold is $278,000. The tax rates are: 7.00% on gains between the exemption threshold and $1,000,000; and 9.90% (7.00% + 2.90% surcharge) on gains above $1,000,000. This tiered structure was enacted by ESSB 5813 (Ch. 421, Laws of 2025), effective retroactively for tax year 2025. Short-term gains are not subject to this tax. Real estate, retirement accounts, and QSBS gains excluded federally are also excluded from this tax.
What is Washington PFML and how much is withheld?
Washington Paid Family & Medical Leave (PFML) is a mandatory program for most employees. For 2026, the total premium rate is 1.13% (a significant increase from 0.74% in 2024 and 0.92% in 2025). Employees pay 0.81% (71.43% of the total). Employers with 50 or more employees pay 0.32% (28.57% of the total). Employers with fewer than 50 employees are exempt from the employer share. Premiums apply on wages up to the Social Security wage base.
What is the WA Cares Fund (Long-Term Care)?
The WA Cares Fund is Washington's long-term care insurance program. Employees contribute 0.58% of gross wages (uncapped: no wage base limit). The premium applies to all gross wages, unlike PFML which has a wage base cap. Employers do not contribute. The WA Cares Fund began paying benefits statewide on July 1, 2026. Some employees may have applied for a permanent exemption (those with private long-term care insurance prior to November 1, 2021).
What is Washington's sales tax rate?
Washington's state sales tax rate is 6.50%. Local rates vary significantly by jurisdiction, with combined rates among the highest in the nation. Groceries (food for home consumption) are exempt from Washington sales tax.
Does the OBBBA tips and overtime deduction apply in Washington?
The OBBBA federal deductions for tips, overtime, and senior income reduce your federal taxable income. Washington has no income tax on wages, so there is no state-level conformity question for those deductions. For the capital gains excise tax, gains excluded from the federal return (such as expanded QSBS exclusions under OBBBA) flow through to the Washington calculation structurally, as Washington starts from federally reported gains. WA DOR has not yet published explicit OBBBA guidance: verify at dor.wa.gov.
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