Washington's Millionaires' Tax: What Tech Professionals Need to Know
If you work in tech in Washington and your income climbs past a certain level, there's a new tax you need to understand. In March 2026, Governor Bob Ferguson signed Senate Bill 6346 into law, creating Washington's first general personal income tax. It's been branded the "Millionaires' Tax," and while the name makes it sound like a problem for someone else, the mechanics deserve a close read if you hold equity compensation or have a big liquidity year on the horizon.
Here's what it actually does, who it hits, and where things stand right now.
The basics
The law imposes a 9.9% tax on Washington taxable income above $1 million per year. The structure works through a $1 million standard deduction, so the first $1 million of income is exempt and only the dollars above that threshold get taxed.
A few details that matter:
The $1 million deduction is per household, not per person. Married couples and registered domestic partners share a single $1 million deduction, whether they file jointly or separately. There's no marriage bonus here.
The tax is effective for tax years beginning January 1, 2028, with the first returns and payments due in 2029. So this isn't something that touches your 2026 or 2027 return. But the planning window is now.
The deduction is indexed for inflation starting in 2030, and charitable contributions deductible under federal rules can be deducted up to $100,000 per household.
The state projects the tax will raise somewhere in the range of $2 to $3.5 billion per year once collections begin, from an estimated 21,000 filers. Revenue is directed toward public education, child care, the Working Families Tax Credit, small business tax relief, and a set of sales tax exemptions.
Why this matters more for tech professionals than the name suggests
The word "millionaire" conjures up an image of permanent wealth. But this tax is on income in a single year, not net worth. That distinction is everything for people with equity compensation.
If you have large recurring RSU vests, exercise and sell ISOs or NSOs, or sell a concentrated stock position, you could cross the $1 million income line in a single year. A tech executive or senior director at a company that has a strong stock year, or an employee whose pre-IPO shares finally become liquid, can land squarely in this tax in the year that income hits.
Washington base income starts with your federal adjusted gross income, then gets modified for state purposes. Income allocated to you on a Schedule K-1 from a pass-through entity counts. That's relevant if you hold interests in partnerships, an S corp, or real estate ventures alongside your W-2 income.
There are some meaningful exclusions. Gains from the sale of residential and other real property are excluded. Worth flagging what is not excluded: public pensions and retirement benefits are subject to the tax. Because the calculation starts from federal AGI, which already includes retirement distributions, and the law was written to make clear that existing pension exemptions don't shield that income, retirement income counts toward the threshold.
How it interacts with the capital gains tax
Washington already has a 7% capital gains excise tax on long-term gains above a threshold (~$280k estimated in 2026, with an additional 2.9% that kicks in for gains over $1 million in 2025 (bringing the total rate above $1 million of capital gains to 9.9%. The new income tax doesn't replace it.
Instead, the law provides a credit for Washington capital gains tax already paid on gains that are also subject to the income tax. The practical effect is that for capital gains caught by both taxes, you don't pay twice, but the credit can erase the benefit of the lower capital gains rate. There are also credits for income taxes paid to another state, and for B&O and public utility taxes paid on the same income. The credits are nonrefundable and can't be carried forward or back.
If you have both wage income and capital gains pushing you over the line in the same year, the interaction between these two taxes gets complicated quickly. This is worth modeling before the year you expect a large event, not after.
Nonresidents aren't automatically off the hook
If you’re thinking about leaving Washington, watch out for this. Being a nonresident doesn't automatically get you out of this tax. Nonresidents are still taxed on Washington-source income, including wages for services performed in the state and income from a business carried on in Washington. There's a safe harbor for nonresidents who perform services in Washington five days or fewer during the year, but that's aimed at people like an Oregon resident who visits a Seattle office occasionally, not at someone leaving the state.
If you're actually planning to move, the concept that matters is domicile, which has its own separate rules, and an important trap is that long-term stock gains are allocated based on where you're domiciled when the sale closes. Leaving the state won't shield equity gains unless the move is real and complete before the sale.
The point: relocating is a real strategy for some people, but it requires actual planning. Moving your mailing address the December before a big vesting year is not a plan. If you're seriously considering a move, build a real one.
The legal fight is real and unresolved
Here's the part that makes this genuinely uncertain. Washington courts have a long history of striking down income taxes. The state constitution requires that property taxes be uniform and capped at 1%, and Washington courts have historically treated income as property. That's why a graduated income tax has been considered unconstitutional for nearly a century, dating back to a 1933 state Supreme Court decision.
Opponents filed a constitutional challenge in April 2026, led by former Attorney General Rob McKenna, arguing the tax violates those provisions. That case is working its way through Klickitat County Superior Court and is widely expected to reach the state Supreme Court, possibly being argued in early 2027.
A separate effort to put the tax to a voter referendum was rejected. In May 2026, the state Supreme Court ruled unanimously that the law is exempt from referendum because it contains a clause deeming it necessary for the support of state government. Opponents then pivoted to the harder initiative route, and it worked. Let's Go Washington gathered enough signatures to place a repeal initiative, IP26-645, on the November 2026 ballot. If it passes, it would repeal the 9.9% income tax before it ever takes effect and add language barring any state or local tax on individual income, while leaving the bill's other provisions, like the sales tax exemptions, in place.
There's also a wild card: five state Supreme Court seats are up for election in November 2026 due to retirements, and the composition of that court will likely determine whether the tax ultimately survives.
In summary, this income tax is the law today, but whether it's still the law when collections begin in 2029 is an open question that hinges on litigation and possibly the ballot box.
What to do now
You don't need to make any moves for your 2026 or 2027 return. But a few things are worth thinking through ahead of time:
Model your big years. If you have a vesting cliff, an IPO, or a planned sale that could push income over $1 million in 2028 or later, run the numbers now so you understand the exposure.
Think about timing. Where you have control over when income is recognized, the gap between now and 2028 gives you room to plan around the threshold.
Watch the litigation. Don't build an irreversible plan around a tax that may not survive, and don't ignore it on the assumption that it won't. Both extremes are mistakes.
If you're considering relocation, plan it properly. Residency and sourcing rules are technical, and a sloppy move can leave you taxed anyway.
The Millionaires' Tax is one more piece of an increasingly complex Washington tax environment, sitting alongside the capital gains tax and recent estate tax changes. For people with concentrated equity and variable income through RSUs, the year-to-year nature of this tax is exactly what makes it worth planning for in advance.
If your income could cross the $1 million line in 2028 or beyond, now is the time to plan, not after the tax takes effect. We help clients model these exact scenarios: when to recognize income, how equity events stack up against the threshold, and what a move would actually require. If that's you, reach out and let's map it out before the decisions get made for you.
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