Washington's "Millionaires' Tax" Is Now Law: What High Earners Should Start Thinking About Now
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Washington’s New High-Income Tax Is Now Law: What to Think About Before 2028
After a lengthy and highly debated legislative session, Washington has officially enacted a new tax on high-income earners.
Senate Bill 6346, signed into law on March 30, 2026, introduces a 9.9% state tax on income above $1 million. For a state that has historically had no tax on earned income, this represents a meaningful shift.
The conversation now moves from “Will this happen?” to “What should we do about it?”
What the Law Actually Does
The new tax applies a 9.9% rate to income above $1 million per year, based on a Washington-specific calculation that starts with federal adjusted gross income and applies state-level adjustments.
A few important details:
The $1 million threshold applies per return (including married couples filing jointly)
The threshold will be indexed for inflation beginning in 2030
The tax becomes effective January 1, 2028, with first filings due in 2029
While the structure borrows from federal income concepts, this is a new state-level system, not simply a copy of the federal tax code.
How This Changes the Landscape
For high earners, the introduction of a state-level tax materially changes the marginal rate environment.
Depending on the type of income, total marginal tax rates on income above $1 million can approach or exceed ~50% when combining:
Federal top marginal income tax rates
Medicare-related taxes
Net investment income tax (where applicable)
The new Washington state tax
The exact impact will vary based on how income is earned and structured, but the direction is clear: after-tax outcomes will matter more than they have historically in Washington.
The Timeline Is Longer Than It Looks — and Shorter Than It Feels
The tax does not take effect until 2028. On paper, that creates a multi-year planning window.
In practice, 2026 and 2027 are the most important years for planning.
That is because many high-income events are not easily adjustable at the last minute, including:
Equity compensation vesting (RSUs, ISOs, NSOs)
Business sales or liquidity events
Deferred compensation payouts
Concentrated stock diversification
Large one-time capital gains
Roth conversion strategies
Once 2028 arrives, most of the meaningful planning opportunities will already be behind you.
There Is Still Uncertainty
Although the law has been enacted, it is not necessarily final in its current form.
Legal challenges are already being prepared on constitutional grounds
Early discussions around a potential repeal effort are underway
It is entirely possible that aspects of the law could change before implementation.
That uncertainty creates a balancing act:
planning should be proactive, but flexible, avoiding strategies that rely on any single outcome.
Who This Affects
The tax is expected to impact a relatively small percentage of Washington taxpayers, generally those with income exceeding $1 million in a given year.
Importantly, this is not limited to consistently high earners.
You may be affected if you have a single-year spike in income, such as:
Selling a business
Exercising stock options
Realizing a large capital gain
Receiving a deferred compensation payout
In other words, even if your typical income is below the threshold, one event can trigger exposure.
What to Start Thinking About Now
The key advantage right now is optionality.
Before 2028, there may be opportunities to:
Evaluate the timing of income recognition
Revisit equity compensation strategies
Assess entity and compensation structures
Coordinate charitable giving and trust planning
Review state residency considerations where appropriate
The right approach depends entirely on your situation, your income profile, and your long-term goals. There is no one-size-fits-all strategy.
Final Thought
This is a structural change to Washington’s tax landscape, not a temporary adjustment.
The window for thoughtful planning is open now, but it will not stay open indefinitely. The earlier these conversations happen, the more flexibility exists.
If you expect a significant income event in the next few years, or if your income may cross the $1 million threshold, it is worth evaluating how this new law could affect you.
Let's Talk
— Marc