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Washington State Income Tax Information

Washington does not levy a state income tax on wages or salaries. This means residents do not pay state income tax on earnings sourced within Washington, including retirement income and Social Security benefits.

Capital Gains Tax

Washington imposes a capital gains tax on long-term capital gains exceeding $270,000 (adjusted for inflation). The tax rates are as follows:

• 7% on gains between $270,001 and $1,270,000
• 9.9% on gains exceeding $1,270,000

Exemptions include gains from the sale of real estate, retirement accounts, livestock, timberlands, commercial fishing privileges, and goodwill from the sale of an auto dealership. Revenue from this tax is allocated to education, childcare, early learning, and school construction projects.

FICA Taxes

Washington follows federal FICA tax rates:

• Social Security: 6.20% on income up to $176,100
• Medicare: 1.45% on all income
• Additional Medicare Tax: 0.9% on income over $200,000 (single) / $250,000 (married)

Total FICA tax rate: 7.65% on income up to $176,100, plus 0.9% on income over $200,000 (single) / $250,000 (married).

Pre-Tax Deductions

Washington allows various pre-tax deductions, including contributions to:

• Health Savings Accounts (HSAs)
• Flexible Spending Accounts (FSAs)
• 401(k) and 403(b) retirement plans
• Dependent Care Assistance Programs

These deductions reduce taxable income and can lower federal income tax liability.

Tax Credits

Washington offers several tax credits to eligible residents:

• Washington Working Families Tax Credit (WFTC): A refundable credit providing financial relief to lower-income households.

Eligibility and credit amounts vary based on income, family size, and residency status.

Interesting Facts About Washington Taxes

• Washington’s capital gains tax was enacted to address the state’s regressive tax system and provide funding for education and childcare programs.
• The state does not impose a sales tax on most food items, but prepared foods and certain beverages are taxable.
• Washington has one of the highest combined state and local sales tax rates in the U.S., with rates exceeding 10% in some areas.

Frequently Asked Questions (FAQs)

Does Washington tax Social Security benefits?

No, Washington does not tax Social Security benefits.

What is the standard deduction in Washington?

Washington does not have a state income tax, so there is no standard deduction at the state level.

Are there tax credits available for renters in Washington?

Yes, Washington offers a refundable Renter Credit to eligible renters.

What types of retirement income are taxed in Washington?

Washington does not tax retirement income, including Social Security benefits, pensions, and 401(k) distributions.