Washington’s new so-called “millionaire tax” may affect numerous high-earning professionals, local business owners and even their immediate family members. Under SB 6346, also known as the state millionaire tax, anyone who earns a million dollars or more is subject to a 9.9% state income tax.
The tax applies to any annual income that exceeds $1 million. One individual’s success could potentially have implications for their spouse and other members of their household as well. Ensuring compliance with the new tax law can help people avoid collection efforts and tax controversies that could lead to financial issues or even criminal prosecution.
What does the law now require?
SB 6346 technically takes effect on January 1st, 2028. Those subject to the tax may need to make payments when filing their annual income tax return beginning in April 2029. The lookback period for residency and income-sourcing begins in 2026, which makes planning now critical. The revenue generated by this new 9.9% tax will fund public schools, health care programs and tax credits for lower-income families.
SB 6346 does include provisions that extend credits to individuals who have paid other forms of taxes, such as capital gains taxes. The tax does not apply to assets, such as real property or business holdings.
Married couples and domestic partners who cohabitate may be subject to the tax based on their joint income. The income of one spouse may push the couple over the $1 million threshold, resulting in both spouses facing financial obligations.
Additionally, the law applies to part-year residents and non-residents who generate income in Washington.
How can people plan?
Those concerned about this tax can explore their eligibility for deductions and evaluate their Washington-based sources of income carefully. Business owners may need to review their operating agreements and pass-through arrangements for entity income to make adjustments that may minimize tax obligations.
Pending lawsuits could theoretically affect the implementation of the new law. For the time being, Washington residents and those who generate income in Washington may benefit from planning as though the law may take effect as enacted by the legislature. Business owners, tech executives and others worried about aggressive Department of Revenue collection efforts or audits likely need guidance as soon as possible.
Those facing state tax collection efforts or concerned about state income tax compliance may benefit from consulting with a Washington state income tax lawyer. Planning in advance can help those potentially impacted by this new tax avoid underpayment and other income tax issues.