Washington State is among the nine states in the U.S. that do not impose a personal income tax, and its property taxes are limited to 1% of a home’s value. However, the state has the fourth highest combined average sales tax in the nation, as reported by the Tax Foundation.
Overview:
- Income tax: 0%
- Washington does not have a personal income tax.
- Property tax: 0.98% of a home’s assessed market value (average)
- The real estate tax rate varies by location, with an average rate of 0.98% in 2022, according to the Washington Department of Revenue.
- Sales tax: 9.38% (average combined state and local)
- While the state sales tax rate is 6.5%, local taxes can add up to 4.1%, resulting in an average combined rate of 9.38%, based on data from the Tax Foundation.
How is income taxed in Washington?
Washington, also known as the Evergreen State, does not impose a personal income tax.
Are pensions or retirement income taxed in Washington?
No, retirement income, including benefits from Social Security, 401(k) plans, and IRAs, is not subject to taxation in Washington State. AARP’s retirement calculator can assist in determining if your savings are sufficient to retire when and how you desire.
What about investment income?
Washington imposes a 7% tax on long-term capital gains exceeding $262,000. This tax applies to assets like stocks, bonds, and other investments held for over a year, but excludes real estate sales and investments through retirement accounts. The tax, implemented in 2022 and upheld by the state Supreme Court in 2023, affects residents living in the state for more than 183 days during the tax year.
Does Washington tax Social Security benefits?
No, Washington does not tax Social Security benefits. However, depending on your income, you may owe federal taxes on a portion of these benefits. If you file an individual federal tax return and earn between $25,000 and $34,000, or file jointly and earn between $32,000 and $44,000, up to 50% of your benefits may be taxed. For incomes above these thresholds, up to 85% of your benefits may be taxed. AARP’s Social Security calculator can help determine the best time to claim benefits to maximize your payout.
How is property taxed in Washington?
Property taxes are managed by county assessors and based on the assessed market value of your home. Counties update property values annually and conduct physical inspections every six years. The state constitution caps property tax rates at 1% of a home’s market value, excluding special local taxes approved by voters. Seniors and disabled residents may qualify for property tax breaks. More information on property taxes, exemptions, or contesting property valuations can be found on your county assessor’s website.
What about sales tax and other taxes?
Sales tax: Washington has a state sales tax of 6.5%, with local taxes up to 4.1%, averaging a combined rate of 9.38%. Prescription drugs and most groceries are exempt from sales tax, while prepared foods, dietary supplements, and soft drinks are taxable. Hearing aids and lenses for glasses are tax-exempt with a prescription.
Use tax: This applies to purchases not subject to sales tax, such as items bought out-of-state or online where Washington sales tax was not collected. The use tax rate matches the state and local sales tax and can be paid online via the Department of Revenue’s website.
Vehicles: A 0.3% tax is added to the local sales tax rate when purchasing a vehicle.
Gas and diesel: Gasoline is taxed at 49.4 cents per gallon.
Alcohol: Liquor is taxed at 20.5% sales tax and $3.7708 per liter. Beer and wine have excise taxes of 26 cents and 87 cents per gallon, respectively.
Lottery winnings: There is no state tax on lottery winnings, but federal taxes still apply.
Will I or my heirs have to pay inheritance and estate tax in Washington?
Washington does not have an inheritance tax, but it does have an estate tax for estates worth more than $2.193 million. The tax rate ranges from 10% for the first $1 million to 20% for estates over $9 million. Surviving spouses are exempt but may need to file an estate tax return.
Are there any tax breaks for older Washington residents?
Washington offers property tax relief through two programs for eligible seniors and disabled residents:
Property Tax Deferral Program: Allows qualifying individuals to defer some or all property taxes on their primary residence, which must be repaid with interest when the home is sold, the homeowner dies, or the home is no longer the primary residence.
Property Tax Exemption Program: Freezes the assessed value of the home and exempts eligible individuals from paying special state and local property taxes. Surviving spouses aged 57 or older may continue to receive tax relief.
More information and application details are available on the Washington State Department of Revenue’s website or through your county assessor’s office. Disabled veterans’ surviving spouses may also qualify for assistance.
Can I qualify for Washington’s tax benefits and breaks as a part-time resident?
To qualify for state tax breaks or assistance, you must reside in Washington for at least six months. Establishing residency can be done by registering to vote, obtaining a state ID or driver’s license, or renting or buying a residence. Check residency rules in any other states where you own a home.
Are military benefits taxed in Washington?
Military pensions and active duty pay are not taxed due to the absence of a personal income tax in Washington.
What is the deadline for filing Washington state taxes in 2024?
Since Washington does not have a personal income tax, residents do not need to file a state tax return. Federal tax returns are due April 15, 2024. AARP’s Tax Calculator can help estimate your annual federal taxes.
