Liberty Bay

Washington's Shifting Landscape
for Business Owners

The taxes, laws, and rules that have reshaped what it means to own a business here - moving faster than any stretch in recent memory. Here's the sequence, and what's still to come.

At a glance

Three numbers that changed the math.

2022
Washington's first tax on long-term capital gains takes effect.
$3M
Washington's estate tax exemption, raised to $3 million in 2025.
9.9%
The "millionaires' tax" on household income over $1 million, starting in 2028.
2022
Jan 1
Tax

Capital gains tax begins

A new era for a "no income tax" state
  • Washington's first-ever tax on long-term capital gains: 7% above an annual deduction ($250,000 at launch, adjusted for inflation each year)
  • Applies to gains on stocks and business interests - real estate is exempt
The shiftThe state with zero capital gains tax now had one. See what a sale would cost
2023
Jan & July
Regulation

Pay transparency & a new payroll tax

Equal Pay & Opportunities Act · WA Cares
  • Pay transparency (Jan): employers with 15+ must post a salary range in every job listing - later rulings raised the litigation risk
  • WA Cares (July): a 0.58% payroll tax on all wages, no cap, for long-term care
For employersHiring got more transparent, and payroll got more expensive.
2025
May 20
Tax

The largest tax package in state history

SB 5813 · ESHB 2081 · SB 5814 - signed the same day
  • Capital gains: a 2.9% surcharge on gains over $1M - top rate now 9.9% (retroactive to Jan 1, 2025)
  • Estate tax: exemption raised to $3M, top rate spiked to 35% - highest in the nation
  • B&O tax: service businesses over $5M rise 1.75% → 2.1%; broad increases phased in
  • Sales tax expanded to services: IT, advertising, software, staffing, security, live presentations
The turning pointBillions in new tax on businesses, estates, and high earners - passed in under two weeks.
2025-26
Rising
Regulation

Payroll and wage costs keep climbing

The quiet, compounding increases
  • Paid Family & Medical Leave: 0.74% → 0.92% → 1.13% (2024-2026)
  • Minimum wage: $16.66 → $17.13 (2026) - highest in the nation
  • Overtime-exempt salary floor: now $80,168/yr, heading toward $93,392 by 2028
For ownersThe cost of employing people keeps ratcheting up, year after year.
2026
March 23
Regulation

Washington bans nearly all non-competes

HB 1155 - effective June 30, 2027
  • Non-compete agreements become void for virtually all Washington workers - regardless of pay
  • Employers must notify current and former workers that existing non-competes are void
  • Also limits non-solicitation and clawback/forfeiture provisions
★ Why this matters for a saleBuyers rely on the seller's non-compete. Only a narrow exception remains - owning at least 1% of the business sold. If you're planning an exit, deal structure now matters more than ever.
2026
July 1
Tax

The estate tax rollback

SB 6347 - a rare reversal
  • After taxpayer pushback, the 35% top estate-tax rate was rolled back to 20%
  • The exemption stays at $3M and no longer adjusts for inflation
A step backBetter than 2025 - but the exemption is still far below federal, and your business counts toward it. Estimate your estate tax
2027
Jan 1
Regulation

More workplace mandates arrive

Healthy Starts Act · Fair Chance Act
  • Pregnancy and postpartum accommodation expands to all employers, regardless of size
  • Further limits on background checks and hiring practices
ReachThe compliance burden now touches even the smallest employers.
2028
Jan 1
Tax

The "millionaires' tax" arrives

ESSB 6346 - signed March 2026, effective 2028
  • A 9.9% tax on household income above $1M/year - Washington's first broad income tax
  • Applies to residents and non-residents with Washington-source income
  • First returns due 2029; Initiative 645, on the November 3, 2026 ballot, would repeal it, and a court challenge is pending
The exit trapA one-time business sale could push an owner over the $1M line in a single year. Try the millionaires' tax calculator
2029
Jan 1
Tax

Some 2025 changes scheduled to unwind

On the horizon
  • The 2025 sales-tax-on-services expansion is set to be repealed (except advertising)
  • The temporary B&O surcharge on the largest companies is set to expire
The lessonIn this environment, today's rules may not be next year's.

What does this mean for you?

Taxes are only half of it. Between the tax changes and the new rules on pay, leave, and non-competes, the ground under a Washington business owner keeps shifting, and each change lands differently depending on the size of the business, the plan for an eventual sale, and how much wealth sits inside the company versus outside it.

The owners who come through these shifts well are the ones who saw them coming. If any of this raises a question about your own situation, that is exactly the kind of thing worth talking through.

Talk to us about the impacts

This timeline is general educational information for business owners and is not investment, tax, or legal advice. Laws and figures change frequently; those shown are summaries. Confirm current details with your CPA or attorney before acting.