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Washington State Income Tax Withholding

Last Updated: January 2026

Overview

Washington has no state income tax on wages. However, Washington does impose a 7% capital gains tax on certain investment income. For payroll withholding purposes, no state income tax withholding is required.

Tax Status

Tax Type Status
State Income Tax on Wages None
Capital Gains Tax 7% (on gains over $278,000)
Withholding Required No (for wage income)

Capital Gains Tax (Not Payroll-Related)

While not affecting payroll withholding, employers should be aware that Washington's capital gains tax:

  • Applies to gains from sales of stocks, bonds, and other capital assets
  • Threshold: $278,000 in capital gains (2026)
  • Rate: 7%
  • Does NOT apply to: Real estate sales, retirement accounts, or gains from business assets

Note: This tax is paid by individuals on their personal tax returns, not withheld from payroll.

No Payroll Withholding Required

Employers with employees working in Washington:

  • Do NOT withhold state income tax from wages
  • Do NOT file state income tax withholding returns
  • Do NOT need state income tax withholding accounts

Paid Family and Medical Leave (PFML)

Washington requires Paid Family and Medical Leave contributions:

Component 2026 Rate
Total Premium Rate 0.92%
Employee Portion ~72.76% of total
Employer Portion ~27.24% of total
Wage Base Social Security wage base ($168,600)

Calculation:

  • Employee withheld: 0.92% x 72.76% = 0.67% (approximately)
  • Employer pays: 0.92% x 27.24% = 0.25% (approximately)

Note: Small employers (under 50 employees) are not required to pay the employer portion.

Workers' Compensation

Washington has a unique state-run workers' compensation system:

  • Administered by: Department of Labor & Industries (L&I)
  • Employee Deduction: Yes, employees contribute a portion
  • Employer Contribution: Yes, employers pay the majority

Special Considerations

  • Federal Withholding: Federal income tax withholding still applies
  • FICA Taxes: Social Security and Medicare taxes still apply
  • Unemployment Insurance: Washington requires employer unemployment contributions
  • No Local Income Taxes: Washington municipalities cannot impose income taxes

Multi-State Employees

If employees work in multiple states:

  • No Washington state income tax withholding for work in Washington
  • Employees may owe income tax to their state of residence
  • Follow resident state rules for work performed in Washington

States With No Wage Income Tax

Washington is one of nine states with no tax on wage income:

  1. Alaska
  2. Florida
  3. Nevada
  4. New Hampshire
  5. South Dakota
  6. Tennessee
  7. Texas
  8. Washington (has capital gains tax only)
  9. Wyoming

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