Washington’s new millionaires’ tax adds a 9.9% rate on personal income above $1 million per household. Governor Bob Ferguson signed Senate Bill 6346 into law on March 30, 2026. Collections begin in 2028, with the first payments due in 2029. If you’re a high earner, a business owner, or both, the decisions that shape your bill get made now.
At Lewis Group CPAs, we’ve handled tax preparation and planning for individuals and small businesses in Southwest Washington since 1994. We’ve been tracking this bill while it was still a draft on a committee desk.
The short version: the tax won’t collect a dollar until 2029, but the choices that determine your 2028 bill happen in 2026 and 2027. That gives you a runway. It’s shorter than it looks.
How does the Washington millionaires’ tax work?
The tax applies a 9.9% rate to personal income above $1 million per household, per year. The first $1 million stays untouched. Only the dollars above that line get taxed.
At a glance:
- Rate: 9.9% on income above the threshold
- Threshold: $1 million per household, per year
- Who’s affected: roughly 0.5% of Washington households, about 21,000 filers
- Collections begin: January 1, 2028
- First payments due: 2029
You can read the official text and summary on the Washington State Legislature bill page if you want the source material rather than a paraphrase.
What income is excluded?
Several categories of income sit outside the tax entirely:
- Proceeds from the sale of real estate
- Gains from qualified family-owned small businesses
- Certain retirement income, including public pensions
Those carve-outs matter more than they look at first. They change how sensible planning works between now and 2028.
How much do millionaires actually get taxed?
Only the income above $1 million is taxed, not the whole amount. So a household with $1,000,500 in income pays the 9.9% rate on $500, which comes to about $50. The first $1 million is not touched.
That distinction trips people up. Crossing the threshold does not put your entire income at 9.9%. It puts the marginal dollars there, and nothing below the line.
Is the millionaires’ tax facing legal challenges?
Yes. Lawsuits are already being prepared. The Washington State Constitution’s uniformity clause has historically made graduated income taxes hard to enforce here, and the courts may yet have something to say.
We’re not going to pretend we know how that plays out. What we can say is that planning around a law that exists today is prudent. Adjusting later if the courts intervene is far easier than scrambling if they don’t. Plan for the rule that’s on the books.
The small business B&O cut that didn’t make headlines
The same legislation carries what supporters call the largest small business tax cut in state history. Starting in 2029, businesses grossing less than $300,000 a year will be exempt from the state’s Business and Occupation (B&O) tax entirely. That covers roughly 65% of all Washington businesses. A separate B&O surcharge also goes away.
For shops around Vancouver, Camas, Washougal, and the rest of Clark and Cowlitz counties, that’s real money staying on the ledger.
The natural question is whether that cut offsets the new income tax for a business owner who also crosses the $1 million personal threshold. The honest answer is that it depends on how your business is structured. That’s exactly the kind of question worth raising with your accountant sooner rather than later.
What high earners should do before 2028
Even with 2028 a couple of years out, choices made this year and next can change what you owe. Four worth weighing:
- Entity structure. Pass-through income from S-corporations, partnerships, and LLCs counts toward the $1 million calculation. The way your business is organized today may not be the most efficient shape for a world where personal income above $1 million gets taxed at 9.9%. This review is cheap to do early and expensive to skip.
- Timing of income. Bonuses, deferred compensation, and one-time capital events scheduled for 2028 or later deserve a second look. In some situations, recognizing income before the tax takes effect could make sense. In others it won’t. Run the numbers rather than guess.
- Charitable giving. The bill raises the charitable contribution deduction cap from $50,000 to $100,000. If giving is already part of your plan, that higher ceiling gives you more room to work with.
- Residency. See below, because this one gets misunderstood the most.
None of these are one-size decisions. They interact with each other, and with federal rules that don’t care what Olympia does. That’s the part that trips people up.
Does moving out of Washington avoid the tax?
Not necessarily. Nonresidents with Washington-sourced income can still owe the tax. Simply moving across the Columbia River isn’t the escape hatch some people assume it is.
If your income has a Washington source, that source follows you. This matters for anyone splitting time or operating a business that touches Washington while living elsewhere. We work with clients on both sides of the river, and the sourcing question deserves a real answer before anyone packs a moving truck.
The most common mistake we’re seeing right now
Here’s a pattern worth flagging, especially for out-of-state and remote sellers. We work with clients in both Oregon and Washington, and the mistake that comes up is business owners paying Washington tax without first checking whether they actually fall below the state’s minimum thresholds.
Out-of-state businesses in particular sometimes pay because they assume they have to, not because they’ve confirmed they cross the line that triggers the obligation. That’s money out the door for no reason.
Before you write a check to the Department of Revenue, confirm that you owe it. We’ve helped a handful of clients navigate exactly this. The review is built into our monthly service plans, so if you’re already a client, it’s a conversation, not a separate bill.
Why work with a Washington CPA on this
Tax law almost never changes in a vacuum. A new personal income tax interacts with federal rules, with the B&O changes, with estate planning, and with the way your books actually flow through the year. Getting caught off guard in 2029 because nobody modeled the numbers in 2026 is avoidable. It just takes someone who watches this closely.
We have five licensed CPAs on staff and have been in business since 1994. We belong to the Washington Society of Certified Public Accountants, the Oregon Society of CPAs, and AICPA & CIMA. We work with clients across the whole state, with strong clusters in trucking, contractors and specialty trades, restaurants, and adult family homes.
Our natural service areas include Vancouver, Camas, Washougal, Longview, La Center, Battle Ground, Clark County, and Cowlitz County, though we serve clients statewide and across the river in Oregon. Our accounting services cover the ongoing work that keeps planning like this from becoming a fire drill.
If you own a business near or over the threshold, the sequence usually looks like this: review your entity structure, map out your income timing for 2027 and 2028, confirm your actual filing obligations (especially if any of your income is out of state), and fold charitable giving into the plan if it fits. Do those four things with a couple of years to spare, and you’ve turned a surprise into a strategy.
FAQ
How does the Washington millionaires’ tax work?
The tax applies a 9.9% rate to personal income above $1 million per household, per year. The first $1 million is not taxed; only the dollars above that line are. Collections begin January 1, 2028, with the first payments due in 2029.
How much do millionaires get taxed in Washington state?
Millionaires pay 9.9% only on the portion of household income above $1 million. A household with $1,000,500 in income pays 9.9% on the $500 over the line, or about $50, not on the full amount.
When does the Washington millionaires’ tax start?
Collections begin January 1, 2028, and the first payments come due in 2029. That gives high earners and business owners time in 2026 and 2027 to plan.
Who has to pay the millionaires’ tax?
Roughly 0.5% of Washington households, about 21,000 filers, are expected to owe the tax. This includes residents and nonresidents with Washington-sourced income above the $1 million threshold.
Does moving out of Washington avoid the millionaires’ tax?
Not on its own. Nonresidents with Washington-sourced income can still owe the tax, so relocating does not remove the obligation if your income has a Washington source.
Is the millionaires’ tax going to be challenged in court?
Legal challenges are already being prepared, largely on the grounds of the state constitution’s uniformity clause. Until a court rules otherwise, the sensible move is to plan around the law as it stands today.
Talk to Lewis Group CPAs
The millionaires’ tax won’t collect a dime until 2029, but the moves that matter happen now. A conversation this year could change what you owe two years from now.
Reach out through our contact page or call (360) 896-8221. We’ll walk through your situation, answer the questions you’ve been sitting on, and help you build a plan that fits the road ahead. No hype, just clear numbers and a steady hand.
