Washington SB 6346: Millionaire Tax and Amendment 696

Washington’s millionaires tax, enacted as Senate Bill 6346 and signed on March 30, 2026, imposes a flat 9.9% tax on household income above $1 million per year. It applies to income earned starting in 2028, so the first returns are due in the spring of 2029. Based on 2022 IRS data, about 21,500 Washington households report income over that threshold, meaning roughly 99% of residents will never owe it.¹

Who Owes the Tax

The tax reaches Washington residents whose household income clears $1 million in a calendar year. Residency generally means you are domiciled in the state or have lived here more than 183 days during the tax year. The Department of Revenue also presumes residency from a set of factors: keeping a Washington home for personal use, holding a state driver’s license, being registered to vote here, or using a Washington address on federal or state tax returns.²

The $1 million threshold is per household, not per spouse. Married couples and registered domestic partners share a single $1 million standard deduction whether they file jointly or separately at the federal level.³ So a couple where each spouse earns $600,000 owes the tax on $200,000. Starting in 2029, the $1 million deduction is adjusted annually for inflation.

How Washington Taxable Income Is Figured

The calculation starts with your federal adjusted gross income, then applies Washington-specific adjustments. The largest is a capital gains swap: federal long-term capital gains and losses come out of AGI entirely, and Washington-defined long-term capital gains go back in.¹ Washington’s existing capital gains tax exempts certain transactions from its definition, including the sale of a primary home and the sale of a qualifying family-owned small business. Those carve-outs carry through, so income from either stays outside the millionaires tax as well.

After the adjustments, the $1 million standard deduction is subtracted. Only income above that line is taxed, and the rate is a flat 9.9%. On $1.5 million of Washington taxable income, the tax lands on $500,000, producing a bill of $49,500.

Credits and Deductions That Reduce the Bill

Several provisions keep the tax from stacking on top of Washington taxes you have already paid, and this is where planning matters most.

Washington capital gains tax you already paid on sales of stocks, bonds, or other financial assets is credited dollar-for-dollar against the millionaires tax, so the same gains are not taxed twice.¹
Business owners who paid Washington’s business and occupation tax or public utility tax get a proportional dollar-for-dollar credit based on their ownership share in the business.¹
Residents who paid income tax to another state on the same income can claim a credit to avoid double taxation across state lines.⁴
Up to $100,000 per household in contributions to Washington state nonprofits is deductible. This is in addition to the $100,000 charitable deduction already allowed under the capital gains tax.¹
Business owners with a net operating loss in a given year can apply that loss against their total tax liability, and up to 80% of unused losses can carry forward to future years, matching the federal approach.¹

Pass-Through Entities Can Pay at the Entity Level

Partnerships, LLCs, and other pass-through entities may elect to pay the 9.9% tax themselves instead of passing it through to individual owners. The entity files the election with the Department of Revenue by April 15 each year, and once filed the election is locked in for that tax year. Owners then take a credit on their personal returns for their share of what the entity paid.⁴

The election exists mainly as a workaround for the federal SALT deduction cap. Tax paid by the entity is a deductible business expense at the federal level rather than a personal state tax payment subject to the $10,000 SALT limit. Electing entities must make estimated tax payments based on reasonable income projections, though no estimated payments are required before July 1, 2029.

Part-Year Residents and Nonresidents

People who move into or out of Washington mid-year follow specific allocation rules. For months you were a resident, your entire AGI counts. For months you lived elsewhere, only Washington-sourced income counts.⁵ The $1 million standard deduction is prorated by the ratio of Washington base income to total federal AGI. If half your income was Washington-connected, you get half the deduction.

Nonresidents who never lived in Washington but earned income there owe the tax only on Washington-source income. Compensation for services is allocated by the ratio of days worked in Washington to total days worked, and business income uses a receipts-based formula drawn from the Uniform Division of Income for Tax Purposes Act.⁴ Professional athletes are allocated by the ratio of duty days spent in Washington to total duty days in the season.

When and How to File

Returns are due on the same date as your federal income tax return, generally April 15, or October 15 if you have a federal extension. All returns must be filed electronically through the Department of Revenue’s online system, with a copy of your federal return and supporting documentation attached.⁴

Payment is due on the filing date whether or not you extended. A federal extension gives you more time to file, not more time to pay. Tax owed must be paid without any assessment or demand from the state. The law takes legal effect on June 11, 2026, but the tax itself applies only starting with 2028 income, so no one owes anything until the 2029 filing season.⁶

Court Challenges and Whether the Tax Will Survive

Two lawsuits were filed soon after the governor signed the bill. The first, brought by former Attorney General Rob McKenna and the Citizens Action Defense Fund on behalf of plaintiffs including the National Federation of Independent Businesses, argues the tax is unconstitutional because it does not tax all incomes uniformly. The case rests on the 1933 Washington Supreme Court decision in Culliton v. Chase, which held that income is a form of property under the state constitution and must be taxed uniformly at a rate no higher than 1%.⁷ The second, filed by Let’s Go Washington, challenges a clause in SB 6346 that blocks voters from repealing the law by referendum.

Defenders point to the state Supreme Court’s 2023 decision in Quinn v. State, which upheld Washington’s capital gains tax as an excise tax rather than a property tax. The court drew a line between a property tax, which falls on owners because they own something, and an excise tax, which targets a specific transaction. The capital gains tax qualified as an excise because it was triggered only by a sale.⁸

The millionaires tax is harder to slot into that framework. Unlike the capital gains tax, it applies to annual income regardless of any specific transaction. Whether Quinn extends this far, or whether Culliton still controls, is the central legal question. Until courts resolve it, the law remains in effect and enforceable.

One more point worth flagging for anyone reading political coverage of the bill: Amendment 696, a floor amendment from Senator Gildon described by supporters as a guardrail against expanding the tax to lower incomes, was rejected during the Senate vote on February 16, 2026, and never became part of the final law.⁶ It has no legal effect on what you owe.

1
Washington Senate Democrats. Millionaires Tax FAQ
2
Washington Department of Revenue. Washington State Residency Definition
3
BDO. Washington’s Historic Millionaires’ Tax Awaits Governor’s Signature
4
Washington State Legislature. Senate Bill Report SB 6346
5
BDO. Washington Enacts Millionaires’ Tax, Changes to Estate Taxation
6
Washington State Legislature. SB 6346 – 2025-26
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KNKX. New Lawsuit Challenges Constitutionality of Washington’s Millionaires Tax
8
Washington Courts. Quinn v. State – No. 100769-8