Over the last few years Washington has become a less favorable state regarding tax policy. They recently enacted a new income tax, albeit only though capital gains. They also have one of the highest sales tax rates in the country.
State Taxes at a Glance – Washington State
| Type of Tax | 2023 |
|---|
| Individual Rates | Capital Gains Tax Rate 7% |
| Corporate / Business Tax Rates | None |
| Gross Receipts Tax | Yes |
| Sales Tax | 8.86% (average) |
| Property Taxes | 0.88% as a percentage of primary home |
| Estate or Inheritance Tax | Yes – Estate Tax |
Income Taxes
In 2022 the Washington State legislature started their first ever income tax. The tax only applies to Capital Gains and is a flat rate of 7%.
New Capital Gains Tax – 7%
Here are the details of the new Capital Gains Tax:
- There is a 7% tax on the sale of stocks, bonds, equities, property, and other investments.
- The threshold to pay the tax is $250,000 (income below this amount is exempt)
- The $250K exemption the same whether or not you file married or single.
- There is a case being appealed to the Washington State Supreme Court to see if this tax is constitutional or not. Stay tuned.
Gross Receipts Business Taxes
Similar to Texas, the state of Washington has no business income tax, but does have a Gross Receipts tax
Washington’s Gross Receipts Tax is called Business & Occupation Tax (B&O). The B&O ranges from between .13% to 3.30% depending on your business classifications.
Labor and Industries (L&I) in Washington State
All states have requirements regarding workers compensation for your employees. Generally, the employer will contact various Workers Compensation companies and choose one on their own. In the State of Washington, all workers compensation is run by the State through the Washington Department of Labor & Industries. A company’s tax rate is based on its NAICS code (type of service you offer). Most payroll companies, such as ADP and Gusto will calculate and pay your workers compensation through your weekly payroll, just like unemployment insurance.
Sales Tax
Sales Tax – like many states, Washington has multiple sales tax rates. One at the state level and another at the local level. The state rate is 6.50% and the average local rate is 2.36% (total average rate for Washington Sales Tax is 8.86%).
Washington also imposes sales tax on various services, such as construction, repair, cleaning, personal training, etc. To see if your business is subject to collecting sales tax, check out the state website here.
Property Taxes
Property Taxes in Washington – the average property tax rate for residential property in the state of Washington is 0.88%, which is slightly below the national average rate of 1.08%.
Estate Taxes in Washington
Washington is one of a few states that has an estate tax. The tax rate ranges from 10% – 20% on any estate over $2,193,000.
DMV fees
Washington’s RTA (regional transit authority) assess a tax as part of your vehicle registration. This tax is deductible on your federal tax return. To learn more, here is a link to Washington’s DMV website.
Domicile in Washington
Unlike most states, Washington does not have a number of days test for domicile. Instead, their state website says the following, “Persons are considered residents of this state … if they take actions which indicate that they intend to live in this state on more than a temporary or transient basis.”
Payroll Taxes in Washington
Unemployment taxes usually consist of three factors. They are the wage base, range of rates, number of schedules. Below is an outline of the three:
- Wage Base – Washington has a wage base of $67,600, the highest in the country.
- UI Rates – range from 0.52% to 6.03%
- Schedules – Washington has a only one schedule
Washington Business Entities – LLCs
Washington is an inexpensive state to set up your LLC. Here are some important facts:
- Washington’s annual LLC fee is only $60.
- When you register with the state, you pay a one time fee of $200
- Secretary of State of Washington website – click here
Washington Tax Contact Phone Numbers
Important phone numbers for the Washington Department of Taxation:
- Website: dor.wa.gov
- Phone# for Individuals – N/A
- Phone# for Businesses – (360) 705-6705