The State of Washington legislature has passed a significant new tax law (SB 6346) that introduces a state-level personal income tax on high-income individuals beginning in 2028. The bill has not yet been signed into law and there could be further legal challenges. The rules are still being interpreted and guidance will continue to evolve, one thing is clear: there is a meaningful planning window right now.
This is not just a technical change, it represents a structural shift in Washington’s tax landscape. If you are a business owner, investor, or high-income earner, this law may affect you in ways that warrant early attention.
What’s Changing (At a High Level)
Beginning in 2028, Washington will impose a 9.9% tax on certain individual income above a $1 million threshold. The tax base starts with federal adjusted gross income and includes a number of Washington-specific adjustments.
This new regime will operate alongside existing Washington taxes, including the capital gains tax, creating a more complex system than Washington has historically had.
Start Planning Now
Even though the tax does not take effect until 2028, the most valuable planning opportunities exist before then.
Here’s why:
1. There Is a Limited Proactive Planning Window (2026–2027)
Many strategies are time-sensitive. Actions taken before 2028 may significantly reduce long-term tax exposure, while waiting could limit available options.
2. Your Situation May Be More Impacted Than Expected
The rules are broader than they may initially appear and could affect:
- Business owners and pass-through entities
- Individuals with multi-state income
- Trust structures and estate planning strategies
- Compensation and equity arrangements
3. This Law Adds Complexity to Existing Planning
Washington now effectively has multiple overlapping tax systems, which increases the importance of coordinated planning across:
- Federal tax
- Washington capital gains tax
- The new income-based tax
- Entity-level tax elections
- Estate and gift
Key Planning Themes to Consider
While strategies will vary by client, several themes are already emerging:
Timing of Income and Deductions
There may be opportunities to:
- Accelerate income into pre-2028 years
- Defer deductions into later years
Business and Entity Structuring
New rules introduce planning considerations around:
- Pass-through entities and potential elections
- Owner-level vs entity-level taxation
Residency and Sourcing
Where you live and where income is earned will matter more than ever. For some clients, residency planning may be a key consideration.
Trust and Estate Planning
Certain structures that were previously effective may be impacted under the new rules and should be revisited.
What We Know and What We Don’t (Yet)
The legislation provides a framework, but important details are still developing, including:
- Administrative guidance from the Department of Revenue
- Implementation mechanics and reporting requirements
- Clarifications around sourcing, credits, and elections
As with any major tax law change, interpretation will evolve over time.
Our Approach
We are actively:
Monitoring developments and guidance
Evaluating planning strategies for different client profiles
Preparing practical frameworks to help clients make informed decisions
Our goal is to help you navigate this change proactively—not reactively.
Let’s Start the Conversation
If you believe this law may apply to you or if you’re unsure, let’s discuss early planning this summer.
Early planning does not mean immediate action. It means:
- Understanding your exposure
- Identifying potential opportunities
- Being prepared as more guidance becomes available
We expect to learn more in the coming months and will continue to keep clients informed.
In the meantime, we encourage you to reach out so we can begin evaluating how this may impact your specific situation.
