Washington Income Tax Calculator 2026

No tax on wages, but a tax on large capital gains

Washington does not tax wages, salaries, interest, dividends or retirement income. It does tax long-term capital gains: 7% on gains above an annual standard deduction, and 9.9% on the part of gains over $1 million. The standard deduction was $278,000 for 2025 ($270,000 for 2024) and is adjusted for inflation each year.

The tax is levied per individual, married couple or domestic partnership, so couples share one standard deduction. Most households never owe it; it applies only when long-term gains from taxable assets exceed the deduction in a single year.

Worked example: selling stock with a large gain

Suppose a single Washington resident sells shares held for years and realizes a $600,000 long-term gain in 2025. The taxable amount is $600,000 − $278,000 = $322,000, and Washington tax at 7% is $22,540. Federal capital gains tax applies on top, at 15% or 20% plus the 3.8% net investment income tax for higher incomes.

Timing matters. Splitting a sale across two tax years uses two standard deductions, which can reduce or eliminate the Washington tax.

Assets exempt from the capital gains tax

The Department of Revenue excludes many assets, including:

• real estate, and interests in privately held entities to the extent the gain comes from real estate
• assets held in retirement accounts such as 401(k)s and IRAs
• timber and timberlands, and REIT dividends and distributions derived from gains on timber or timberlands
• assets that are depreciable or eligible for expensing for federal tax
• certain livestock used in farming or ranching, commercial fishing privileges, goodwill from selling a franchised auto dealership, and assets lost to condemnation
• Returns are due on the same day as your federal income tax return. Only people who owe the tax must file, and they attach a copy of their federal return for the same year.

Federal tax is your main income tax

For everyone else, the federal return is the whole income tax picture. Wages only, standard deduction:

Retirees and Washington

Pensions, IRA and 401(k) withdrawals, annuities and Social Security are not taxed by Washington, and stock held inside a retirement account is outside the capital gains tax. Retirees who sell large taxable brokerage positions are the group most likely to meet the capital gains tax, so planning sales over several years can help.

Federal tax can still reach Social Security, with up to 85% of benefits taxable for retirees with substantial other income (IRS Publication 915). WA Cares premiums are charged only on wages, so they stop when you stop working and are not taken from pensions or benefits.

Sales tax and the federal SALT deduction

Washington collects much of its revenue through a 6.5% state sales tax plus local taxes, averaging 9.57% combined, among the highest in the country. If you itemize, you can deduct state and local sales tax on your federal return instead of income tax, together with property tax, up to $40,400 for 2026. The Washington capital gains tax is an excise tax, so check with a tax professional before treating it as a deductible state income tax.