Washington State Taxes: Sales, Property, B&O, and Capital Gains

Washington state taxes are built around what the state doesn’t charge as much as what it does: there’s no personal income tax, so most of what you pay runs through the 6.5 percent retail sales tax, county property tax, and a handful of narrower taxes on business receipts, real estate sales, large capital gains, and estates. Two state payroll premiums also come out of your paycheck even though neither is technically an income tax.

No Income Tax, but Your Paycheck Still Shrinks

Washington does not tax wages, salaries, or other earned income at the state level. You won’t file a state income tax return, and your pay stub won’t carry a state income tax line. Federal income tax, Social Security, and Medicare still come out as usual.

Two state-mandated programs do reduce your take-home pay:

Paid Family and Medical Leave (PFML). The combined premium for 2026 is 1.13 percent of gross wages. Employees pay 71.43 percent of that and employers cover the rest, so your share works out to roughly 0.81 percent of gross wages.¹
WA Cares Fund. This long-term care insurance program is funded entirely by employees at 0.58 percent of gross wages. Someone earning $50,000 a year pays about $290. Eligible beneficiaries can start using benefits for long-term care services on July 1, 2026.

Together those two premiums add roughly 1.39 percent on the employee side.

Sales and Use Tax

The retail sales tax is the state’s largest revenue source. Under RCW 82.08.020, Washington charges 6.5 percent on each retail sale of tangible personal property and certain services.² Cities and counties stack their own local rates on top, so the total you see at the register usually lands somewhere between about 7.5 and 10.5 percent depending on where you shop.

If you buy something out of state or online and the seller doesn’t collect Washington sales tax, you owe an equivalent use tax on it. This comes up most often with vehicles bought across state lines; the Department of Licensing can hold up registration until the use tax is paid.

What’s Exempt

Groceries. Food and food ingredients sold for home consumption are exempt, in solid, frozen, dried, or liquid form. The exemption does not cover prepared food, soft drinks, bottled water, or dietary supplements.³
Prescription drugs, including insulin (which qualifies without a prescription).
Prosthetic devices and mobility equipment prescribed and fitted by a licensed provider, along with repair parts and labor.

Property Tax

Property tax is run at the county level and pays for schools, fire districts, libraries, and other local services. Under RCW 84.36.005, all real and personal property is taxable unless a specific exemption applies.⁴ Your county assessor sets fair market value, and what you owe depends on the combined levy rates of your overlapping districts.

State law caps annual increases in most property tax levies at 1 percent per year, which limits how fast your bill can grow even when your home’s market value climbs faster. Payment splits into two installments: the first half is due April 30 and the second half October 31.⁵ Delinquent amounts accrue interest, and long-term nonpayment can lead to foreclosure by the county treasurer.

Relief for Seniors, People With Disabilities, and Veterans

Homeowners who are 61 or older, retired because of disability, or qualifying veterans may be eligible for a property tax exemption or deferral. Qualification depends on household income, and the thresholds vary by county. For tax years 2024 through 2026, the lowest county thresholds for the most generous exemption tier start around $30,300, while higher-cost counties like King County set that tier as high as $60,000. Deferral thresholds, which let you postpone payment rather than reduce it, range from about $45,450 in lower-cost counties to roughly $89,000 in King County.⁶ You apply through your county assessor’s office.

Real Estate Excise Tax

When real property changes hands, the seller owes a real estate excise tax (REET) based on the sale price. The state portion uses graduated tiers, so higher-priced properties are taxed at progressively higher rates. Through the end of 2025, the state tiers are:⁷

$525,000 or less: 1.10 percent
$525,001 to $1,525,000: 1.28 percent
$1,525,001 to $3,025,000: 2.75 percent
$3,025,001 and above: 3.00 percent

Thresholds adjust periodically for inflation, and the Department of Revenue publishes updated rate tables each year. Agricultural land and timberland sales are taxed at a flat 1.28 percent state rate regardless of price. Cities and counties can add local REET on top.

Capital Gains Excise Tax

Washington taxes the sale or exchange of long-term capital assets like stocks and bonds. Under RCW 82.87.040, the base rate is 7 percent on taxable Washington capital gains.⁸ Starting with tax year 2025, gains above $1,000,000 face an additional 2.9 percent surtax, bringing the effective rate on that portion to 9.9 percent.⁹

Every individual can deduct $250,000 from their Washington capital gains before the tax applies, so it only reaches people with gains above that amount.¹⁰ Real estate sales are exempt, as are sales of interests in privately held businesses under certain conditions, livestock and agricultural property, and assets in certain retirement accounts. Returns are due April 15 of the year following the tax year, so the 2025 return, which first reflects the tiered rates, is due April 15, 2026.⁹

Estate Tax (and No Inheritance Tax)

Washington has no inheritance tax, so people who receive assets from someone who has died owe nothing to the state on what they inherit. The estate itself, though, is taxed on its total value before distribution.¹¹

For 2026, the filing threshold and exclusion amount is $3,076,000. If the gross value of all of a decedent’s property is below that figure, no estate tax is owed and no return is required.¹² The tax covers Washington residents and non-residents who own real estate or tangible personal property in the state.

For deaths on or after July 1, 2025, marginal rates run from 10 to 35 percent on the taxable estate (the amount above the exclusion):¹³

Up to $1,000,000: 10 percent
$1,000,001 to $2,000,000: 15 percent
$2,000,001 to $3,000,000: 17 percent
$3,000,001 to $4,000,000: 19 percent
$4,000,001 to $6,000,000: 23 percent
$6,000,001 to $7,000,000: 26 percent
$7,000,001 to $9,000,000: 30 percent
Over $9,000,000: 35 percent

The return and any tax are due within nine months of the date of death. Washington doesn’t charge a late payment penalty, but interest accrues on any balance not paid in that window.¹¹

Business and Occupation Tax

If you run a business in Washington, you owe B&O tax on gross receipts: total revenue before any deduction for expenses, cost of goods sold, or losses.¹⁴ A business owes B&O even in a loss year.

The rate depends on the activity:

Retailing: 0.471 percent of gross receipts
Wholesaling and manufacturing: 0.484 percent of gross receipts
Service and other activities: 1.5 percent of gross receipts, which covers professional firms like law offices, accounting practices, and consultancies¹⁵

A business with multiple lines of activity may owe under more than one classification. Small businesses with low liability can qualify for a credit that reduces or wipes out the tax, with thresholds that depend on how much of their taxable income falls under the higher-rate service category.¹⁶ Missing a filing deadline triggers a 9 percent penalty right away, rising to 19 percent after a month and 29 percent after two.¹⁷

1
Employment Security Department Washington State. Paid Family and Medical Leave Premium Rate Increases to 1.13% in 2026
2
Washington State Legislature. RCW 82.08.020 Tax Imposed – Retail Sales
3
Washington State Legislature. RCW 82.08.0293 Sales of Food Exemptions
4
Washington State Legislature. Washington Code 84.36.005 – Property Subject to Taxation
5
Washington State Legislature. RCW 84.56.020 Taxes Collected by Treasurer – Dates
6
Washington Department of Revenue. Income Thresholds for Senior Citizen and Disabled Persons Property Tax Exemption and Deferral for Tax Years 2024-2026
7
Washington Department of Revenue. Real Estate Excise Tax
8
Washington State Legislature. RCW 82.87.040 Tax Imposed – Long-Term Capital Assets
9
Washington Department of Revenue. New Tiered Rates for Washingtons Capital Gains Tax
10
Cornell Law School. Wash. Admin. Code 458-20-301 – Capital Gains Excise Tax – Definitions, Deductions, Exemptions, and Allocation of Gains and Losses
11
Washington Department of Revenue. Estate Tax FAQ
12
Washington Department of Revenue. Estate Tax
13
Washington State Legislature. RCW 83.100.040 Estate Tax Imposed – Amount of Tax
14
Justia. Washington Revised Code RCW 82.04.220 Business and Occupation Tax Imposed
15
Washington Department of Revenue. Business and Occupation (B&O) Tax
16
Washington Department of Revenue. Credits
17
Cornell Law School. Wash. Admin. Code 458-20-228 – Returns, Payments, Penalties, Extensions, Interest, Stays of Collection