Washington State’s New Millionaire Tax: What Retirees Should Know

Washington State’s New Millionaire Tax: What Retirees Should Know

Washington State recently approved legislation establishing a 9.9% tax on annual income exceeding $1 million, commonly referred to as the “Millionaire Tax.” The measure is expected to take effect January 1, 2028, with the first tax payments due in 2029.¹

For decades, Washington has been known as one of the few states without a personal income tax. The new law represents a notable shift in the state’s tax structure and is designed to generate revenue while impacting only a small percentage of high-earning households.¹

How the Tax Works

Under the legislation, the 9.9% tax applies only to income above $1 million in a given year. For example, a household earning $1.2 million would potentially pay the tax only on the amount above the threshold.

Lawmakers estimate the tax will affect a relatively small share of Washington residents, primarily high-income earners, executives, and business owners.^2-4

Potential Implications for Retirees

Most retirees are unlikely to be directly affected by the tax because typical retirement income levels fall below the $1 million threshold. However, certain financial situations could bring retirees into the taxable range, including:

• Large capital gains events, such as selling significant stock holdings or business interests
• Substantial Roth IRA conversions or other taxable income events
• Executive compensation or deferred income received in retirement
• Liquidity events such as the sale of a company or concentrated investment positions

For retirees with substantial investment assets, the timing of income recognition events may become more important as the 2028 implementation date approaches.^5-8

Washington’s Changing Tax Landscape

Washington already implemented a capital gains tax on certain investment profits above $250,000, although several assets such as real estate and retirement accounts are generally exempt.

The new millionaire tax represents another step in the state’s evolving approach to taxation and could influence long-term planning for high-net-worth households.^9-11

Planning Considerations

For retirees and pre-retirees with significant assets, it may be beneficial to review long-term tax strategies, including:

• Timing of major asset sales
• Multi-year Roth conversion strategies
• Estate and income distribution planning
• Diversification of income sources in retirement

As with many new tax laws, legal challenges and potential revisions may occur before the law takes effect.^12-15

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References

1. Washington State Standard. (2026, March 10). Washington lawmakers advance 9.9% tax on income above $1 million, effective 2028. https://washingtonstatestandard.com/2026/03/10/with-marathon-debate-and-heated-vote-wa-house-advances-income-tax
2. Cornfield, J., & Lucia, B. (2026, March 10). After marathon debate, WA House advances income tax. Washington State Standard. https://washingtonstatestandard.com/2026/03/10/with-marathon-debate-and-heated-vote-wa-house-advances-income-tax/
3. Clark Nuber. (2026, February 18). WA state millionaires tax proposed legislation. https://clarknuber.com/articles/wa-state-millionaires-tax-proposed-legislation/
4. Washington State Senate Democrats. (2026, February 3). Washington state Democrats introduce Millionaires Tax. https://senatedemocrats.wa.gov/blog/2026/02/03/washington-state-democrats-introduce-millionaires-tax/
5. Internal Revenue Service. (2024). Retirement income and retirement savings. https://www.irs.gov/retirement-plans/retirement-income-and-retirement-savings
6. Tax Foundation. (2024). What are capital gains taxes? https://taxfoundation.org/taxedu/glossary/capital-gains-tax/
7. Kitces, M. (2023). The tax implications of Roth conversions and retirement income planning. https://www.kitces.com/blog/roth-conversion-tax-planning-retirement-income/
8. U.S. Securities and Exchange Commission. (2023). Investment and retirement planning: Managing investment income and taxes. https://www.investor.gov
9. Washington State Department of Revenue. (2024). Washington capital gains tax. https://dor.wa.gov/taxes-rates/other-taxes/capital-gains-tax
10. Tax Foundation. (2023). Washington capital gains tax overview. https://taxfoundation.org/location/washington/
11. Washington State Department of Revenue. (2024). Capital gains tax frequently asked questions. https://dor.wa.gov/taxes-rates/other-taxes/capital-gains-tax-faq
12. Internal Revenue Service. (2024). Retirement plans FAQs regarding Roth conversions and rollovers. https://www.irs.gov/retirement-plans/roth-conversions
13. Kitces, M. (2023). Strategies for Roth conversions and retirement income planning. Kitces.com. https://www.kitces.com/blog/roth-conversion-tax-planning-retirement-income/
14. U.S. Securities and Exchange Commission. (2023). Saving and investing for retirement. https://www.investor.gov/introduction-investing/investing-basics/save-and-invest
15. Tax Foundation. (2024). How tax policy changes affect financial planning. https://taxfoundation.org

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