Tax insight

Seattle enacts local B&O tax changes under Proposition 2

Insight
5 minute read
December 04, 2025

What happened?

Seattle voters approved Proposition 2 in the November 2025 election. Key elements include increases to all of Seattle’s Business & Occupation (B&O) tax rates through 2032, a new $2 million ($2M) standard deduction, and targeted credits for comprehensive cancer centers and nonprofit pediatric hospitals. The changes take effect on January 1, 2026.

Why is it relevant?

Beginning with the 2026 tax year, Seattle taxpayers may claim the new $2M standard deduction. Businesses with less than $2M in Seattle-sourced income will owe no Seattle B&O tax. Taxpayers above the $2M threshold will be subject to higher B&O tax rates. Certain healthcare providers may be eligible for new credits to offset the impact of these increased rates.

Actions to consider

Taxpayers with Seattle activities should forecast their Seattle-sourced gross receipts with the new $2M standard deduction and higher rates to estimate liability by B&O tax classification. Healthcare providers should evaluate eligibility for the new credits and analyze whether documentation supports qualifying receipts and rate calculations.