ARTICLE | April 01, 2026

Washington has just enacted a new tax on certain high-income individuals, marking a significant change to the state’s tax structure. The law applies to income above $1 million and is scheduled to take effect beginning in tax year 2028, with first filings due in 2029. Supporters see it as a long-overdue correction in one of the country’s most regressive tax systems. Critics see a constitutional fight and an economic risk. While the broader policy debate will continue, the more immediate question for taxpayers is what this means in practice—and how to prepare.

What the new law does

ESSB 6346 introduces a tax on Washington taxable income above $1 million. The calculation starts with federal adjusted gross income (AGI) and then applies Washington-specific additions, subtractions, deductions, and credits.
Key structural elements include:

• A $1 million standard deduction, indexed over time
• A charitable contribution deduction of up to $50,000
• Coordination provisions to reduce overlap with other Washington taxes, including potential credits for capital gains tax and certain business taxes
• A 9.9% tax rate on taxable income after deductions and credits
• Estimated tax payment requirements aligned with federal rules beginning in 2029

The law is designed to apply primarily to high-income households with significant wages, investment income, or business-related income.

Timing and uncertainty

The tax is scheduled to begin on income during 2028, with payments and filings due in 2029. As with any major tax change, there is potential for legal and legislative developments before implementation. However, given the lead time, taxpayers who may be affected have an opportunity to plan well in advance.

Who should pay attention

This law will be most relevant for individuals and families with:

• Annual income that may exceed $1 million in a given year
• Significant equity compensation (RSUs, stock options)
• Ownership in pass-through entities (partnerships, LLCs, S corporations)
• Anticipated liquidity events (business sales, large asset sales)
• Multi-state residency or sourcing considerations

Even taxpayers who do not expect to exceed the threshold annually may be impacted in years with one-time income events.

What high earners should do now

For those likely to be affected, the focus should be on proactive, multi-year planning. The structure of this tax—particularly its reliance on federal AGI—means that timing, income composition, and entity structure will all play a role in the final outcome. Early modeling can help avoid surprises and create flexibility.

The bottom line

This new tax introduces additional complexity for high-income households in Washington. The families most likely to be affected should use the next two years to model income, review entity structure, clean up residency facts, and plan for cash flow impact for 2029. If the law survives, those households will be ready. If it does not, they will still end up with a better understanding of their tax exposure across states and income sources. That is time well spent either way.

Although the law does not take effect until 2028, the most effective planning will happen well before then. Building a clear picture of income, structure, and potential exposure now allows for more informed decisions in the years ahead.

To schedule a tax planning appointment with your Larson Gross advisor, please contact them directly or use the form below. Advisors will also be reaching out to discuss planning opportunities specific to your situation if your historical income could have the future potential to be subject to this tax.

In addition, we will be hosting free webinars covering this topic this spring/summer – more info to come.