Tax Insight

Washington enacts a new tax on millionaires and estate tax changes

Insight
5 minute read
April 13, 2026

What happened?

On March 30, Governor Bob Ferguson (D) signed into law Washington Engrossed Substitute Senate Bill 6346 (Bill 6346), establishing a 9.90 percent income tax on individuals with adjusted gross income exceeding $1 million. This marks the first time Washington has imposed a tax of this kind on individual income. The tax takes effect January 1, 2028, with the first returns due in April 2029.

Additionally, Engrossed Senate Bill 6347 (Bill 6347), enacted on March 25, amends Washington state's estate tax laws and introduces significant changes to the applicable exclusion amount and establishes a temporary increase in estate tax rates for a one-year period.

NOTE: The Washington Supreme Court has granted an emergency motion for accelerated review of Heywood v. Hobbs, a case seeking to require Secretary of State Steve Hobbs to process a referendum challenge to the new tax law.

Why is it relevant?

Bill 6346 fundamentally changes Washington's tax landscape. Individual residents of Washington with adjusted gross income that exceeds $1 million will owe a new 9.90 percent tax on income above the standard deduction threshold. The tax also would apply to nonresident individuals earning certain income from Washington sources that exceeds $1 million. The tax uses a unique computation that starts with federal adjusted gross income but requires several Washington-specific modifications, including different treatment of long-term capital gains and disallowance of pre-2028 loss carryovers. An elective pass-through entity tax is also enacted.

Bill 6347 provides long-term estate tax relief in Washington by maintaining the higher $3,000,000 exclusion amount and restoring the original rate schedule, limiting the 2025 Legislature's substantial rate increases to a single year.

Actions to consider

Individuals whose annual adjusted gross income is at or near $1 million should begin evaluating how the new tax will affect you before the January 1, 2028 effective date. Considerations for individuals include: determining if they have Washington residency or are subject to the tax as a nonresident, understanding the modifications Washington requires to federal adjusted gross income, available deductions, evaluating the pass-through entity election for business owners, and assessing credits available for taxes paid to other states.

Given the changes to the estate tax and the applicable exclusion amount, Washington residents should review their estate plans and may want to consider strategies, such as lifetime gifting, to reduce their taxable estate before the temporary but substantial tax rate increase takes effect on July 1, 2025.