Financial Planning in Washington State: What High-Earning Families Need to Know in 2026

Washington State often gets attention for what it doesn’t have: a personal income tax. But for people living and working in Washington, especially in places like Kitsap County and the Greater Seattle area - there’s more to understand beneath the surface.

Financial planning conversations here sometimes look a little different than in other states, largely because of how Washington structures its taxes and how recent laws have evolved.

Washington’s “No Income Tax” Reputation

Washington remains one of the few states without a personal income tax. Wages, salaries, bonuses, and most earned income are not taxed at the state level. For many households, that’s one of the defining features of living here.

That said, Washington does collect revenue in other ways, and those areas are often where planning conversations naturally focus.

Capital Gains: What Changed Heading Into 2026

Washington’s long-term capital gains excise tax continues to be one of the most discussed topics in financial planning circles.

Beginning with the 2025 tax year (filed in 2026), the structure became tiered:

• Long-term capital gains up to $1 million are taxed at 7%, after the standard deduction.

• Gains above $1 million are subject to an additional 2.9%, bringing the top rate on those amounts to 9.9%.

This tax applies to certain investment asset sales, such as stocks or business interests. Many asset types are excluded by law, including retirement accounts and real estate, which is why the tax affects some transactions but not others.

The standard deduction used in calculating this excise tax is adjusted annually for inflation and increased again for 2025.

Because the tax is transaction-based, it often shows up in years when people sell assets rather than every year, which is why it tends to draw attention when it appears.

Estate Tax Updates in Washington

Washington also has a state-level estate tax, separate from the federal estate tax system.

A key update took effect for individuals passing away after July 1, 2025:

• The estate tax exemption increased to $3 million, up from roughly $2.2 million.

While the exemption rose, Washington’s estate tax remains progressive, with marginal rates increasing as estate values grow. At the highest tiers, rates can reach up to 35%.

For many families, this is one of the areas where state-specific rules differ significantly from federal thresholds, which is why it frequently comes up in planning discussions and documentation.

Sales and Property Taxes: The Tradeoff

Without an income tax, Washington relies more heavily on sales and property taxes.

• Sales tax rates vary by location, with local jurisdictions, such as Seattle or Kitsap County adding their own layers on top of the state base rate.

• Property taxes are assessed locally and are tied to both property values and voter-approved levies.

In higher-value areas across the Puget Sound region, property tax assessments are often a recurring part of household financial paperwork and annual reviews.

How People Typically Navigate This Information

Most Washington residents rely on official state resources to understand how these taxes apply in practice. The Washington Department of Revenue provides:

• Filing guides and worksheets

• Definitions of taxable and excluded assets

• Online filing systems for capital gains excise taxes

Because Washington’s tax structure is relatively unique, many people find that simply understanding which rules apply and when they apply, helps bring clarity to their broader financial picture.

Bottom line:

Financial planning in Washington State isn’t defined by a single tax or rule. It’s shaped by a mix of what’s absent (a general income tax), what’s specific (capital gains and estate taxes), and how local taxes fund public services. Understanding that landscape provides helpful context for how financial decisions are documented, timed, and reviewed in 2026 and beyond.

Disclosure: Commonwealth Financial Network® does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.