Washington State for NRI families: no income tax on wages, a capital gains tax and WA Cares

Washington is home to many NRI families in technology, mostly with stock pay. The state has no tax on wages, but it does tax large gains on stock, and it has payroll programmes that other states do not.

Wages

The state's Department of Revenue says Washington does not currently have an individual income tax. The Department's website also notes a new 9.9% income tax starting on 1 January 2028 for individuals and joint filers with adjusted gross income over $1 million. Whether wages count towards that amount is not settled on the page we read, so check the details if your income is near that level.

The capital gains excise tax

Washington taxes long-term capital gains above a deduction, at a rate of 7% on the first $1 million of Washington capital gains and 9.9% above that, for tax year 2025 onward. The standard deduction was $278,000 for 2025, and it is adjusted each year.

• What is taxed. Long-term gains, on assets held for more than a year, from stocks, bonds, business interests and certain other investments.
• What is exempt. Real estate, retirement accounts such as a 401(k) or IRA, and a few other assets.
• Who owes it. Individuals whose net long-term gain exceeds the deduction. For gains on shares and bonds, the gain belongs to Washington if you are domiciled in the state at the time of sale. Domicile is presumed to continue until you show otherwise, so moving out before you sell is a question of facts.
• When and how. The return is due on the federal due date, 15 April, and an extension to file does not extend the time to pay. You need not file if your net long-term gains are exempt or below the deduction.

For stock pay, the income when an RSU vests is wages and is outside this tax. A later sale is a sale of shares whose cost for tax purposes starts at the vesting value, and a gain after more than a year is the kind this tax applies to. The Department's pages do not address RSUs by name, so confirm with a preparer.

Payroll premiums

• Paid Family and Medical Leave. For 2026 the premium is 1.13% of wages up to the Social Security wage cap, shared between employee and employer.
• WA Cares Fund. The long-term care programme takes 0.58% of gross wages with no cap, and is paid by the employee. The Fund's website says workers on non-immigrant work visas, such as H-1B and L-1, are automatically exempt from 1 January 2026, and that anyone who wants to keep contributing can tell their employer in writing. Whether premiums paid before 2026 can be refunded is not clear from the page. Check your pay slip and ask your employer.

Sales tax and business tax

The state sales tax rate is 6.5%, with local rates on top, collected where the customer receives the goods or services. Washington has no income tax on a business, but it has a gross-receipts tax called the business and occupation tax, which applies to most businesses including many freelancers. A small-business credit removes the tax for very small amounts, and the registration thresholds should be checked with the Department.

Estate tax

Washington has its own estate tax, with an exclusion of about $3 million, far below the federal figure. The rates and their dates have changed in recent years, so check the Department's current table before you plan around them. For families with a home and investments in the region, it is worth planning for.

Property tax

County assessors value property at full market value. Tax is paid in two halves, on 30 April and 31 October.

What to do

1. Check your pay slip for the WA Cares line if you hold a work visa.
2. Before selling stock, estimate Washington's gains tax alongside the federal tax.
3. If you plan to move out, work out the date of your domicile change before the sale.
4. Look at the state estate tax if your family's assets are in Washington.

Washington's capital gains tax follows domicile at the time of sale, not the place where you worked when the shares were granted.