Washington State Has No General Income Tax for 2025, Only Capital Gains Tax

Key Takeaways

• Washington State has no general state income tax for 2025, applying to all residents and workers.
• Capital Gains Tax of 7% applies to long-term gains over $250,000, upheld by Washington Supreme Court.
• Seniors may benefit from updated property tax deferral thresholds; sales and excise taxes remain high.

Washington State’s tax system stands out in the United States 🇺🇸 for its unique approach, especially when it comes to state income tax. As of July 10, 2025, there have been no changes to the state’s longstanding policy: Washington State does not have a general state income tax on wages, salaries, or most other forms of earned income. This update provides a clear summary of what remains the same, what has changed regarding the Capital Gains Tax, who these rules affect, important effective dates, required actions for residents and newcomers, and the broader implications for those living or planning to move to Washington State.

Summary of What Changed

For the 2025 tax year, the most important update is that nothing has changed regarding a general state income tax—Washington continues to be one of the few states without this tax. However, the Capital Gains Tax, first introduced in recent years, remains in effect after surviving legal challenges. The Washington Supreme Court upheld its constitutionality, so this tax continues to apply in 2025. There have also been updates to income thresholds for property tax deferral programs, but these do not relate to state income tax rates or brackets.

Who Is Affected by These Rules?

• All residents and workers in Washington State are affected by the absence of a general state income tax. This includes U.S. citizens, permanent residents, temporary visa holders, and undocumented immigrants who live and work in the state.
• Individuals with high investment income—specifically, those who realize more than $250,000 in long-term capital gains in a single year—are affected by the Capital Gains Tax.
• Seniors and lower-income homeowners may be affected by updates to property tax deferral thresholds, which can provide relief from property taxes but are not related to income tax.

Effective Dates

• The no state income tax policy continues for the 2025 tax year and is expected to remain in place for the foreseeable future.
• The Capital Gains Tax applies to gains realized in 2025 and beyond, with no announced changes to the rate or threshold.
• Property tax deferral thresholds for 2024–2026 are already in effect, with specific income limits set by county.

Required Actions for Residents and Newcomers

If you live, work, or plan to move to Washington State, here’s what you need to know and do:

1. No State Income Tax Filing Required
   • You do not need to file a state income tax return for wages, salaries, or most other earned income in Washington State.
   • You will still need to file a federal income tax return with the IRS if your income meets federal requirements. You can find the federal tax forms and instructions on the IRS official website.
2. Capital Gains Tax: Check Your Investment Income
   • If you sell certain long-term investments (such as stocks or bonds) and your total gains exceed $250,000 in a year, you must file and pay the 7% Capital Gains Tax on the amount above $250,000.
   • This tax does not apply to most people, as the threshold is high.
   • Some assets are exempt from this tax, including real estate, retirement accounts, and livestock.
   • If you think you might owe this tax, visit the Washington Department of Revenue’s Capital Gains Tax page for official guidance and forms.
3. Property Tax Deferral: Check If You Qualify
   • Seniors and certain low-income homeowners may qualify for property tax deferral programs. The income threshold varies by county.
   • For example, in Adams County, the threshold is $45,450 for the 2024–2026 period.
   • These programs can help reduce your property tax burden if you meet the requirements.
4. Budget for Other Taxes
   • While you save on state income tax, be prepared to pay higher sales tax (typically 6.5%–10.5% depending on your location), property tax (usually 0.8%–1.2% of your home’s assessed value), and various excise taxes (like those on fuel and alcohol).

Implications for Pending Applications and Newcomers

If you are moving to Washington State for work, study, or family reasons, or if you are an immigrant adjusting your status, the lack of a state income tax can make your financial planning easier. You do not need to worry about state income tax withholding from your paycheck, nor do you need to file a separate state income tax return. However, if you have significant investment income, you should review your holdings to see if the Capital Gains Tax applies to you.

For those with pending immigration applications, such as adjustment of status or work authorization, your tax obligations in Washington State will be similar to those of U.S. citizens and permanent residents. You must comply with federal tax laws, but you will not face a state income tax on your wages or salary.

Washington State Income Tax: What Stays the Same in 2025

• No State Income Tax on Wages or Salaries: Washington State continues its policy of not taxing personal income from work. This applies to all residents, regardless of immigration status.
• No State Income Tax Brackets or Rates: Since there is no state income tax, there are no brackets or rates to track for 2025.
• Capital Gains Tax Remains: The 7% tax on long-term capital gains over $250,000 per year is still in effect. This is the only state-level tax on certain types of income, and it affects only a small portion of the population.
• Other Taxes Fund State Services: Washington relies on sales, property, and excise taxes to pay for schools, roads, and other public services.

Capital Gains Tax: Details and Exemptions

The Capital Gains Tax is a relatively new feature in Washington’s tax system. Here’s how it works:

• Threshold: The tax applies only if your total long-term capital gains from the sale of certain assets exceed $250,000 in a single year. This threshold is not adjusted for inflation.
• Rate: The tax rate is 7% on the amount above $250,000.
• Who Pays: Only individuals with high investment income pay this tax. Most residents are not affected.
• Exemptions: The following assets are not subject to the Capital Gains Tax:
  • Real estate (homes, land, rental properties)
  • Retirement accounts (401(k), IRA, pensions)
  • Livestock
  • Certain small business assets
• Legal Status: The tax faced legal challenges, but the Washington Supreme Court ruled it constitutional, so it remains in effect for 2025.

Other Taxes in Washington State

Because there is no state income tax, Washington relies on other taxes to fund government services:

• Sales Tax: Ranges from 6.5% to 10.5%, depending on the city or county. This tax applies to most goods and some services.
• Property Tax: Typically 0.8%–1.2% of your property’s assessed value. Rates vary by county and city.
• Excise Taxes: These are taxes on specific goods, such as gasoline, alcohol, and tobacco.

Recent Developments and Policy Debates

• No New Income Tax Legislation: Lawmakers have not introduced any bills to create a state income tax for 2025. All recent legislative activity has focused on other tax types, such as the Capital Gains Tax and property tax deferral programs.
• Legal and Political Debates: The Capital Gains Tax has been at the center of legal and political fights. Opponents say it is a form of income tax and violates the state constitution. Supporters argue it is an excise tax and is needed to fund education and social services.
• Economic Impact: Experts say Washington’s tax system is “regressive.” This means lower-income residents may pay a higher share of their income in taxes, mainly because of high sales and excise taxes. Some groups want to introduce a progressive income tax to make the system fairer, while others believe the current system helps attract businesses and wealthy individuals.

Practical Implications for Residents and Businesses

• For Residents: The lack of a state income tax can mean more take-home pay, especially for those moving from states with high income taxes. However, you may pay more in sales and property taxes.
• For Businesses: The absence of a state income tax is often seen as a reason for companies and high-income individuals to move to Washington State. This can help create jobs and boost the local economy.
• For Immigrants and Newcomers: If you are new to Washington State, you do not need to worry about state income tax on your wages. This can make your transition easier and your paychecks larger.

Step-by-Step: How Washington’s Tax System Affects You in 2025

1. Check Your Income Type
   • If your income comes from a job (wages or salary), you do not pay state income tax.
   • If you have investment income, check if your long-term capital gains are over $250,000 in a year.
2. Review Your Tax Obligations
   • File your federal tax return as usual.
   • If you owe Capital Gains Tax, file the required forms with the Washington Department of Revenue.
3. Budget for Other Taxes
   • Expect to pay sales tax on most purchases.
   • If you own property, budget for property taxes.
   • Remember excise taxes on items like gasoline and alcohol.
4. Explore Property Tax Relief
   • If you are a senior or have a low income, check if you qualify for property tax deferral programs in your county.

Future Outlook

• No General State Income Tax Expected: There are no plans to introduce a state income tax in the near future.
• Capital Gains Tax Likely to Stay: Unless there are new legal challenges or legislative changes, the Capital Gains Tax will remain in effect.
• Ongoing Policy Debates: The conversation about tax fairness and the need for new revenue sources will continue, but big changes are not expected soon.

Official Resources for More Information

For the most accurate and up-to-date information about taxes in Washington State, visit the Washington Department of Revenue. Here you can find:
– Guidance on the Capital Gains Tax
– Property tax deferral program details
– Contact information for specific questions

Summary Table: Washington State Tax Overview (2025)

Key Takeaways and Next Steps

• No state income tax on wages or salaries in Washington State for 2025.
• Capital Gains Tax applies only to long-term gains over $250,000 per year, at a rate of 7%.
• No action needed for most residents regarding state income tax, but check your investment income if you have large gains.
• Budget for higher sales and property taxes compared to other states.
• Check official resources for the latest updates and guidance.

As reported by VisaVerge.com, Washington State’s tax system continues to be a major draw for new residents and businesses, but it also raises questions about fairness and the best way to fund public services. For now, the rules remain clear: no state income tax, a targeted Capital Gains Tax for high earners, and a reliance on sales and property taxes for state revenue.

If you are planning to move to Washington State, or if you are already a resident, understanding these rules can help you make better financial decisions and avoid surprises at tax time. For more details or to find official forms and instructions, visit the Washington Department of Revenue’s website.

By staying informed and checking official resources, you can make the most of Washington State’s unique tax environment and plan your finances with confidence.

Learn Today

Capital Gains Tax → A 7% tax on long-term investment gains exceeding $250,000 per year in Washington State.
State Income Tax → A tax on wages or salaries; Washington does not impose this tax on residents’ earned income.
Property Tax Deferral → A program allowing eligible seniors or low-income homeowners to delay paying some property taxes.
Excise Taxes → Special taxes on specific goods like fuel, alcohol, and tobacco collected by Washington State.
Long-term Capital Gains → Profits from selling assets held longer than one year, subject to specific tax rules.

This Article in a Nutshell

Washington State maintains no state income tax in 2025, easing financial planning. Only investors with large gains pay a 7% Capital Gains Tax. Seniors may access property tax deferral. Residents face higher sales and excise taxes, balancing the state’s unique tax system with diverse financial impacts.
— By VisaVerge.com