Washington Millionaires Tax: What High-Income Taxpayers Need to Know

Washington state has taken a notable step in reshaping its tax structure. A new law establishes a 9.9 percent tax on Washington adjusted gross income above $1 million, with an effective date set for January 1, 2028.

For high-income households and business owners, the immediate takeaway is not urgency, but time. The multiyear lead-up to implementation offers a clear runway to evaluate financial decisions, revisit existing structures, and align tax strategy with broader long-term objectives. While legal and administrative questions may continue to develop, the framework itself is now in place.

This environment favors a steady, coordinated approach. Early planning, grounded in a clear understanding of both financial goals and evolving requirements, may help position taxpayers to respond thoughtfully as Washington’s tax landscape continues to take shape.

Washington Millionaires Tax Overview

Washington’s new law imposes a 9.9 percent tax on Washington adjusted gross income above $1 million. It is expected to affect roughly 30,000 taxpayers statewide. The legislation includes targeted relief for lower-income households and certain small businesses, though the majority of liability will fall on high earners.

What Remains Uncertain

While the law is in place, some questions remain. Legal challenges may arise, including arguments that the tax conflicts with the state constitution. A referendum is also possible, which could alter or repeal the law.

Administrative guidance will continue to develop, clarifying how income is calculated, reporting obligations, and potential interactions with other state taxes. Staying informed during this period allows taxpayers to anticipate requirements rather than react after the fact.

Tax Planning Considerations Before 2028

The lead time before implementation presents opportunities for deliberate, long-term planning. Key areas for consideration include:

• Income timing and recognition. Aligning income and deductions across multiple years may help manage total liability efficiently.
• Business structures and compensation. Closely held businesses may benefit from evaluating entity structures, distributions, and compensation models in light of the new tax.
• Residency and multistate considerations. Understanding exposure in other states may influence broader financial strategy.
• Coordination with existing taxes. The new tax complements Washington’s capital gains and estate taxes, making integrated planning important.
• Cash flow and estimated tax planning. Early modeling can help prepare for potential liabilities and minimize surprises.

The law’s enactment makes proactive, coordinated planning more relevant than ever. A measured approach focused on long-term objectives may help taxpayers navigate compliance requirements, align strategies with broader goals, and respond efficiently to future developments.

How We Help

AAFCPAs supports businesses and high-income taxpayers navigating evolving state and local tax requirements with a strategic, coordinated approach. Our team evaluates multistate tax obligations, including corporate income, sales and use, property, cannabis retail, and gross receipts taxes, and performs nexus analyses to determine where activity creates filing requirements or exposure. We combine technical expertise with practical guidance and technology to help manage compliance efficiently, streamline reporting, and address notices or audits. By integrating planning across existing Washington taxes and new obligations, our approach helps align strategy with long-term financial objectives, reduce risk, and maintain operational flexibility. Clients benefit from ongoing access to professionals who understand both their business and the nuances of state and local tax law, allowing them to make informed decisions with confidence.

These insights were contributed by Kelly Zack, MST, Partner, State & Local Tax (SALT) and Daniel Seaman, CPA, Tax Partner.

Questions? Reach out to our authors directly or your AAFCPAs partner.

AAFCPAs offers a wealth of resources on strategic tax planning. Subscribe to get alerts and insights in your inbox.