California vs Washington: Taxes & Take-Home Pay 2026

California vs Washington for tech and high earners

Washington does not tax wages; California does, at up to 13.3%. That makes Seattle versus the Bay Area one of the most-searched state comparisons among software and engineering workers, whose pay often includes equity. On a $220,000 salary the difference is $16,166 a year in Washington’s favour.

The comparison is not “no tax versus tax”, though. Washington has two employee payroll premiums, a capital gains tax that targets exactly the people most likely to make this move, and one of the highest sales tax rates in the country.

Payroll premiums: SDI against PFML and WA Cares

Washington’s two premiums together cost about $2,765 at this salary, against $2,860 for California SDI. WA Cares funds a state long-term care benefit; workers with an approved exemption do not pay it.

Capital gains and stock compensation

California taxes capital gains as ordinary income. Washington taxes long-term capital gains at 7%, plus an extra 2.9% (9.9% in total) on the portion over $1,000,000, but only above an annual standard deduction ($278,000 for 2025). Wages, including RSU income taxed as wages when shares vest, are not subject to the Washington capital gains tax.

Example: the $220,000 earner above also sells stock for a $100,000 long-term gain. California adds about $9,300 of state tax on the gain. In Washington the gain sits below the standard deduction, so the state tax is zero. Real estate and assets held inside retirement accounts are outside Washington’s capital gains tax.

• Equity that vests after you move to Washington may still be partly California-source if the vesting period covered time you worked in California.
• Selling a large position just before you leave California makes the whole gain taxable there; waiting until after a genuine move can change the answer.
• ESPP and option income taxed as wages also escapes Washington tax, but California SDI applies to it while you work in California because SDI has no wage cap.

Sales tax and property tax

Washington’s average combined sales tax of 9.57% is higher than California’s 9.03%, and its maximum is 10.7%. On $40,000 of taxable spending the difference is about $216 a year, a fraction of the income tax saving for most earners.

Washington property taxes are set locally and apply to current assessed value. California’s Proposition 13 limits the general levy to 1% of an assessed value that rises at most 2% a year until a sale, so recent buyers in California and Washington are on more similar footing than long-time owners.

Who gains most and least from the move

The saving grows with income because California’s rates are graduated and SDI is uncapped. At $100,000 a single filer keeps $4,824 more in Washington; at $400,000 the gap is $34,302.

The people who gain least are lower-paid workers who spend most of their income on taxable goods, because Washington’s higher sales tax takes a larger share of their budget, and investors with very large long-term gains, who face Washington’s capital gains tax above the annual deduction. Households with big salaries and modest investment sales gain most.

Moving from California to Washington mid-year

File California Form 540NR for the move year. Washington has no individual income tax return for wages, though anyone with a capital gains tax liability files a separate Washington capital gains return. Remember that remote work for a California employer from Washington is Washington-source for days you work there.

Washington does not tax pensions, IRA or 401(k) withdrawals, or Social Security, so retirees moving north lose California tax on all retirement income.