Financial planning in Washington
No income tax — but a capital gains excise and the steepest estate tax in the country.
Direct answer
Washington has no personal income tax, which makes it look simple. It is not. The state taxes long-term capital gains at 7%, rising to 9.9% above $1 million of gains, which lands squarely on employees diversifying vested equity. And for deaths on or after July 1, 2025 its estate tax runs from 10% to 35% above a $3 million exclusion, the highest top rate of any state. For a Seattle-area household, the planning work is about when to sell and how the estate is structured, not about income tax.
Washington tax treatment
Figures are for tax year 2025, each read from the source beside it. Thresholds and rates are revised regularly; confirm the current year before acting on any of them. What these rules change in a household’s plan, from the order accounts are drawn to the timing of Roth conversions, is set out in the retirement tax planning overview.
Long-term capital gains above a standard deduction are taxed at 7%, and gains over $1 million at 9.9%. Real estate and retirement accounts are exempt, and the tax applies if you are domiciled in Washington when you sell.
With no income tax, pension, IRA and 401(k) withdrawals and Social Security are untouched by the state, and retirement accounts are exempt from the capital gains excise as well.
For deaths on or after July 1, 2025 the exclusion is $3 million and the rates run from 10% on the first $1 million of taxable estate to 35% above $9 million. A qualified family-owned business interest deduction of up to $3 million, indexed, is available.
Worth doing here
Things that are worth doing in Washington that would not be worth doing, or would work differently, somewhere else.
Because the excise steps up on gains over $1 million in a year, spreading the sale of a concentrated position across tax years can keep more of it at 7% — and the domicile rule means where you live when you sell decides whether it applies at all.
With a top rate of 35%, lifetime gifting and trust structures that would be optional elsewhere earn their keep here. The family-owned business deduction is worth understanding for anyone whose estate includes a closely held company.
Federal and state, together
With no state income tax, the federal deduction for state and local taxes is mostly about property tax for a Washington household, and many stay under the cap. The federal layer dominates income planning here; the state layer shows up at sale and at death.
The federal deduction for state and local taxes is $40,400 for tax year 2026 and begins to shrink above $500,000 of modified adjusted gross income, down to a floor of $10,000, and is scheduled to return to $10,000 after 2029. The federal estate tax exclusion is $15,000,000 per person for deaths in 2026. IRS, Instructions for Schedule A (2025), line 5e; IRS, tax year 2026 inflation adjustments (Rev. Proc. 2025-32).
Cities
Each city page covers what is local — how households there tend to be paid, what the first meeting usually covers — and inherits this state layer.
Amazon, Microsoft, Starbucks and Boeing all employ heavily here and are all publicly traded, so a large share of local households hold employer stock of some kind.
Watch and learn
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Common questions
No personal income tax. It does have a capital gains excise tax of 7% on long-term gains above a standard deduction, rising to 9.9% on gains over $1 million, with real estate and retirement accounts exempt.
For deaths on or after July 1, 2025, rates run from 10% to 35% above a $3 million exclusion. The 35% top rate applies above $9 million of taxable estate and is the highest in the country.
No. There is no income tax, and retirement accounts are exempt from the capital gains excise.
No. Flames Financial Planning is based in Minnetonka, Minnesota, and serves Washington households through a virtual planning relationship. This page describes the service area and does not claim a Washington office.
Yes. State tax treatment shapes withdrawal order, Roth-conversion timing, and where investments are best held. Planning includes tax guidance and review of a completed return; Premier adds tax projections and preparation and filing through an independent tax partner.
Next step
A discovery meeting covers your situation, what you pay now, and whether a fixed quarterly membership is a better fit.
