Beginning Jan. 1, 2028, individuals with Washington taxable income are subject to a 9.90% tax and must file an annual Washington income tax return, on or before the date the taxpayer’s federal income tax return for the taxable year is required to be filed. Individuals not owing the tax are not required to file a return.
Determining Washington taxable income
Washington taxable income is calculated starting with a taxpayer’s Washington base income, i.e., federal adjusted gross income (AGI) modified for state purposes.
Standard deduction
Individuals may deduct a $1 million standard deduction from Washington base income. For married spouses or state-registered domestic partners, the combined standard deduction is capped at $1 million, regardless of whether they file joint or separate returns. The standard deduction is adjusted annually for inflation beginning in 2030.
For part-year residents, the standard deduction is reduced proportionally based on the ratio of Washington base income to total AGI.
Other modifications
Additional deductions and additions include:
- Charitable contributions: Charitable contributions deductible under Internal Revenue Code section 170 may be deducted, up to $100,000 per individual, or $100,000 in total for spouses or domestic partners combined, regardless of filing status.
- Gambling losses: Taxpayers may deduct 90% of Washington-allocated gambling losses incurred during the tax year, limited to the amount of gambling income included in the Washington base income.
- Commercial fishing vessel construction: Amounts deposited into a capital construction fund may be deducted if the contribution reduces the taxpayer’s federal taxable income and is intended for vessel construction, reconstruction or acquisition.
Note that a number of other modifications are required in computing a taxpayer’s Washington taxable income, including rules for capital gains, federal, state and local obligations, tribal income, certain trust income and activities related to cannabis, among others.
Credits against the income tax
The legislation provides several credits designed to prevent multiple taxation, including:
- A credit for income taxes paid to another state or political subdivision on income also taxed by Washington
- A credit for Washington business and occupation (B&O) tax and public utility taxes paid on the same income
- A credit for Washington capital gains tax paid on gains subject to both taxes
Allocation and apportionment rules
Residents, part-year residents and nonresidents
For Washington residents, all income is allocated to the state. Part-year residents are taxed on:
- All income earned while a resident, and
- Washington-source income earned while a nonresident
Nonresidents are taxed only on income derived from Washington sources. Nonresident employment income is taxable to Washington to the extent services are performed in the state, regardless of the employer’s commercial domicile. When services are performed both in and outside Washington, compensation is apportioned using a days-worked ratio, or another reasonable method approved by the Washington Department of Revenue.
Business income
For nonresidents conducting business within and outside Washington, income is generally sourced using principles from the Uniform Division of Income for Tax Purposes Act (UDITPA). Apportionable income is assigned using a receipts factor comparing in-state to total receipts.
Specific sourcing rules apply to:
- Tangible personal property sales
- Real and personal property rentals and leases
- Services
- Intangible property
- Real property capital gains
- Interest and dividends
Professional and student athletes
Nonresident professional athletes must apportion compensation to Washington using a ‘duty day’ methodology, based on the ratio of Washington duty days to total duty days worldwide. ‘Duty days’ include days from the beginning of the preseason training period through the last game in which the professional athletic team competes or is scheduled to compete during the tax year.
Income derived from the commercial use of a nonresident student athlete’s name, image or likeness is allocated to Washington when the related publicity services primarily occur in the state. Revenue-sharing payments from institutions of higher education will be apportioned using a duty day approach, with further legislative guidance required by Jan. 1, 2028.
PTET election
Pass-through entities, including partnerships and limited liability companies, may elect to pay tax at the entity level at the same 9.90% rate. The election:
- Must be made annually no later than June 15 of the taxable year
- Is irrevocable for the year once the election is made
- Requires estimated tax payments, though none are required prior to July 1, 2029
Owners receive a credit for their share of tax paid by the entity but must include their distributive income on their individual Washington returns and add back any entity-level tax deductions reflected in federal adjusted gross income.
Administration and compliance
Beginning July 1, 2030, individuals subject to the tax must make estimated payments unless the annual tax liability is less than $5,000. Penalties may apply if the estimated tax is less than 90% of the tax return or 100% of the previous year’s return.
Washington income tax returns must generally be filed electronically by the federal filing deadline. Taxpayers owing tax must pay in full by the original due date, regardless of filing extensions. Total late-filing penalties may not exceed 25% of the tax due, with interest and additional penalties applicable for substantial underpayment of estimated taxes.
