Let’s Talk About Washington’s New Tax Law

Washington’s new tax law is, more than anything else, a prompt. A prompt to revisit your timeline, your giving strategy, your trust structures, your income mix, and whether anything you were already planning should be sequenced differently in light of changes coming in 2028.

That’s exactly the kind of conversation your Brighton Jones team is here for. Not to hand you a tax summary, but to think through what this means specifically for your life — and to help you make decisions you’ll feel good about, whatever the courts ultimately decide.

What we know, and what we don’t

Here’s a plain summary of what’s in the law:

• 9.9% tax on the receipt of Washington taxable income (federal AGI with adjustments) above $1,000,000. The legislature deliberately structured it as a tax on the receipt of income rather than an income tax per se, using the same constitutional framework as Washington’s capital gains tax.
• Applies to residents and non-residents with Washington-sourced income, with apportionment rules that can affect more people than the headline threshold suggests
• Effective January 1, 2028 — a meaningful planning runway if used well
• Credits for income taxes paid to other states, Washington capital gains tax paid, and Washington B&O tax paid
• Exemption for gains from the sale of real estate
• Non-WA tax-exempt income is taxed; interest from U.S. obligations is not
• $100,000 charitable deduction for Washington-based charities (regardless of filing status)

What we don’t know: how courts will rule. Washington’s constitution has historically made income-related taxes difficult to sustain. Governor Ferguson is expected to sign the bill, but legal challenges are likely to follow. The 2028 effective date gives us time to watch this unfold — and to plan thoughtfully regardless of the outcome.

A note on timing

For most people, the first question is simply: what does this mean for me? That’s the right place to start, and it’s a question your Brighton Jones team is well-equipped to help you think through in the context of your specific situation.

For those considering more significant changes—changing your address, evolving your charitable giving strategy, evaluating new tax strategies—it’s worth remembering that the 2028 effective date provides real breathing room. Decisions like that deserve to be made thoughtfully.

Great questions to be asking right now

The question most people are asking right now is some version of: “How will this affect me?” or “What should I do?” or “How do I avoid it?” Those are understandable questions. But, in our experience, the best financial decisions don’t begin with a tax rate. They begin with your life.

Rather than leading with the tax itself, we’d invite you to start with the decisions that were probably already on your horizon—and ask whether this new law changes any of the sequencing:

Were you already thinking about retirement timing? If your earned income is projected to drop below $1M in the next few years anyway, the tax may be largely irrelevant to your long-term picture. If you’re on the fence between winding down in 2026 versus 2029, that’s worth modeling now.

Do you have a business exit on the horizon? The law includes credits for Washington capital gains tax already paid and exempts gains from real estate sales. If your exit involves a mix of assets, structure matters—and so does timing. The 24 months before a transaction remain the most consequential planning window.

Are you a non-resident with Washington-sourced income? This is one of the law’s more counterintuitive provisions—and one that catches more people than the headline suggests. If your federal AGI exceeds $1M and you have even $1 of Washington-sourced income, you’re subject to the tax. But it’s not just on that dollar: the law apportions the exemption based on WA-sourced income relative to your total federal AGI. For example, a client earning $5M nationally with $500k of WA-sourced income doesn’t simply owe tax on income above $1M in Washington. The math is more involved—and for some people, more significant—than it first appears.

Have you considered trust structures? Not all trusts are treated equally here. Non-grantor trusts can, in the right circumstances, provide meaningful relief—while certain other structures will not. If trust planning is already part of your estate strategy, this is worth revisiting with your team before 2028.

Does your income flow through a pass-through entity? A PTE election may help on the federal side—but it won’t offset the Washington tax. If you’ve been assuming that structure solves the problem, it’s worth a conversation before that assumption gets built into your planning.

How does this interact with Washington’s existing capital gains tax? Washington law provides a limited credit against the capital gains excise tax for certain taxes paid to another taxing jurisdiction. Capital gains tax and B&O tax are separate regimes, and any interaction depends on transaction‑specific facts and applicable law.

A quiet opportunity inside the law

Buried in the legislation is a provision that deserves more attention than it’s getting: a charitable deduction of up to $100,000 for contributions to Washington-based charitable organizations—available regardless of filing status.

For clients who already give philanthropically—or who have been thinking about it—this is more than a tax footnote. It’s an invitation to examine where and how you give, and whether your strategy is as intentional as it could be. Washington’s legislature built a carve-out that essentially says: if you earn significantly here, we’d like you to give back here. That’s a question worth engaging with on your own terms.

We’re ready when you are

If you have questions, reach out to your advisor. We’re ready to dig in.

This content is for informational and educational purposes only and should not be construed as individualized advice. For individualized advice tailored to your specific circumstances, please consult with your adviser.