Washington’s new 9.9% income tax (ESSB 6346) has a marriage penalty, and it’s not subtle. Two unmarried people can each earn up to $1 million tax-free. The same two people, married, share a single $1 million deduction — and filing separately doesn’t fix it.
This isn’t a quirk. The legislature wrote it this way deliberately. Here’s exactly how it works, what it costs, and what (if anything) you can do about it.
For an overview of ESSB 6346, see Washington’s New Income Tax: What Founders, Investors, Athletes, and High Earners Need to Know. For the full tax landscape, see Washington State Taxes.
This post is part of our Complete Guide to Washington's New Income Tax.
The Statutory Mechanism
Section 314 of ESSB 6346 provides:
In computing a taxpayer’s Washington taxable income, a taxpayer may deduct from the taxpayer’s Washington base income a standard deduction of $1,000,000 per individual, or in the case of spouses or state registered domestic partners, their combined standard deduction is $1,000,000, regardless of whether they file joint or separate returns.
Read that last clause carefully. “Regardless of whether they file joint or separate returns.” The legislature closed the obvious workaround before anyone could try it. Whether you file jointly, file separately, or do some combination, you and your spouse share one $1 million deduction.
For single filers, the math is simple: earn up to $1 million, pay nothing. Earn above $1 million, pay 9.9% on the excess.
For married couples, it’s the same — but the $1 million applies to your combined household income.
What the Marriage Penalty Actually Costs
Let’s walk through the numbers at different income levels. All examples assume both spouses are Washington residents with no other modifications to their base income.
Two tech workers, each earning $600,000.
If unmarried: each is below $1 million. Total Washington tax: $0.
If married: combined income is $1.2 million. Deduction is $1 million. Taxable income is $200,000. Washington tax: $19,800.
Marriage penalty: $19,800.
Two senior executives, each earning $800,000.
If unmarried: each is below $1 million. Total Washington tax: $0.
If married: combined income is $1.6 million. Taxable income is $600,000. Washington tax: $59,400.
Marriage penalty: $59,400.
A couple earning $1.2 million and $300,000.
If unmarried: the higher earner pays 9.9% on $200,000 = $19,800. The lower earner pays nothing. Total: $19,800.
If married: combined income is $1.5 million. Taxable income is $500,000. Total: $49,500.
Marriage penalty: $29,700.
Two founders, each earning $2 million (e.g., from an exit).
If unmarried: each pays 9.9% on $1 million = $99,000. Total: $198,000.
If married: combined income is $4 million. Taxable income is $3 million. Total: $297,000.
Marriage penalty: $99,000. That’s a $99,000 annual tax increase for being married — the cost of an entire deduction that an unmarried person would receive but a married person does not.
The Formula
The marriage penalty under ESSB 6346 equals 9.9% multiplied by the lesser of: (a) $1 million, or (b) the lower-earning spouse’s income above zero (but only to the extent the combined income exceeds $1 million).
In plain English: the penalty is worst when both spouses earn roughly similar amounts in the $500,000–1 million range, because that’s where the lost deduction has maximum impact. The penalty maxes out at $99,000 per year — 9.9% of the entire $1 million deduction that the second spouse would have received if unmarried.
Why Filing Separately Doesn’t Help
In many states, a married couple can mitigate the marriage penalty by filing separate returns. Each spouse reports their own income and claims their own deduction.
Washington’s legislature anticipated this and closed the door explicitly. Section 314 says the combined deduction is $1 million “regardless of whether they file joint or separate returns.” Even if you file separately, you still split a single $1 million deduction between you.
This is an unusual design choice. The federal tax code and most state income taxes provide separate brackets and deductions for joint vs. separate filers, which at least partially addresses the marriage penalty. Washington chose not to do this. The $1 million threshold is a per-household number, not a per-person number, and no filing election changes that.
Community Property Makes It Worse (or at Least More Complicated)
Washington is a community property state. Under RCW 26.16, earnings during marriage are community property — they belong equally to both spouses regardless of who earned them.
This creates an additional layer of complexity. If one spouse earns $2 million and the other earns nothing, community property rules mean each spouse is treated as having earned $1 million for purposes of federal taxation.
For Washington’s income tax, the statute uses “federal adjusted gross income” as its starting point (§101(3), referencing IRC §62). Since the federal return for a Washington couple already reflects community property allocation, the starting point for Washington’s income tax is community property income — which means the spouse who earned nothing still has $1 million of community income allocated to them.
This doesn’t change the total tax owed (the combined deduction is still $1 million against combined income), but it does affect how the numbers flow through the return. And it makes the separate filing option even more meaningless: even if you file separately, community property rules attribute half the income to each spouse, and the combined deduction is still capped at $1 million.
The Charitable Deduction Has the Same Problem
The marriage penalty isn’t limited to the standard deduction. Section 309 applies the same structure to the charitable contribution deduction:
...up to a maximum deduction of $100,000 per individual, or in the case of spouses or domestic partners, their combined charitable deduction is limited to $100,000, regardless of whether they file joint or separate returns.
An unmarried couple can each deduct up to $100,000 in charitable contributions — $200,000 total. A married couple is limited to $100,000 combined. For high earners who give generously, this is another penalty: the tax benefit of charitable giving is halved by marriage.
At the margin, this costs up to $9,900 per year (9.9% × the lost $100,000 charitable deduction). Combined with the standard deduction penalty, a married couple giving $200,000+ to charity faces a maximum combined marriage penalty of approximately $108,900 per year.
How This Compares to Other States
Washington’s marriage penalty is unusually blunt. Most state income taxes — and the federal income tax — mitigate the marriage penalty through one or more of these mechanisms:
Separate brackets for joint filers. The federal tax code doubles the bracket widths for married filing jointly at lower income levels (though not at the top, which is where the federal marriage penalty persists). Washington doesn’t use brackets at all — it’s a single flat threshold.
Separate filing with separate deductions. Most states allow married couples filing separately to each claim their own deduction. Washington’s §314 explicitly prevents this.
Head-of-household status. The federal code provides a middle-ground filing status for unmarried people with dependents. Washington’s statute contains no equivalent.
The result is that Washington has one of the most aggressive marriage penalties of any income tax in the country — dollar for dollar, comparable to or worse than the federal marriage penalty at high income levels, but imposed on top of the federal penalty rather than as a replacement for it.
What You Can Actually Do About It
Let’s be direct: there aren’t many options, and none of them are simple.
Divorce is not a tax strategy. Some commentators have half-jokingly suggested that couples might divorce to claim two deductions. Setting aside the obvious personal and legal complications, the Department of Revenue will be watching for sham divorces — and a divorce undertaken solely to reduce state taxes, followed by continued cohabitation, would invite scrutiny. Washington courts have a well-developed body of law on sham transactions, and the DOR has broad authority to disregard transactions lacking economic substance.
Domestic partnerships have the same penalty. Section 314 applies to “spouses or state registered domestic partners.” If you’re in a registered domestic partnership, you get the same $1 million combined deduction. Switching from marriage to a domestic partnership doesn’t help.
Maximize other deductions. The $100,000 charitable deduction (§309) still provides value, even at the reduced married-couple cap. Donor-advised funds, charitable remainder trusts, and bunching strategies can help you maximize the benefit within the $100,000 limit.
Accelerate or defer income. If one spouse has variable income (bonuses, equity vesting, consulting fees), timing income to keep the household below $1 million in certain years — or concentrating income in fewer years to minimize the number of years the tax applies — can reduce the total penalty over time.
Retirement plan contributions. Contributions to qualified plans reduce federal AGI, which flows through to Washington base income. A cash balance plan can shelter $150,000–$300,000+ per year per spouse. For dual-income couples near the $1 million line, this can be the difference between owing the tax and not.
Residency planning. If one spouse can establish genuine domicile in a non-income-tax state (not a paper move — a real one), the nonresident spouse would only owe Washington tax on Washington-source income. The resident spouse would still owe on all income. This is complex and must be done carefully — see The 30-Day Rule for Washington Income Tax Residency and Washington’s New Income Tax and Remote Workers: Who Owes What? for the sourcing rules.
Will This Change?
The marriage penalty in ESSB 6346 was not an oversight. During the legislative session, multiple witnesses — including me — testified about the penalty’s impact. The legislature chose to keep the combined deduction anyway, likely because doubling it to $2 million for married couples would have significantly reduced projected revenue.
Future legislatures could amend §314 to provide a $2 million combined deduction for married couples (or $1 million per spouse). But there’s no indication this is on the near-term agenda. For planning purposes, assume the marriage penalty is here to stay.
The constitutional challenge to ESSB 6346 could also affect this — if the tax is struck down entirely, the marriage penalty goes with it. But if the tax survives (which is the prudent planning assumption), the marriage penalty survives too.
Need help modeling how Washington’s marriage penalty affects your household? Book a 20-minute intro call to discuss your situation. Also see: Washington State Taxes Guide | Income Tax Planning Guide for High Earners
Related Posts
- Stock Option Exercise Timing: Planning Before Washington's 2028 Income Tax
- Washington vs. California: A Tax Comparison for Founders and Investors
- Washington's New Income Tax and Pass-Through Business Income: S-Corps, LLCs, and Partnerships
- New Release: Washington State Tax Planning Guide for High Earners
- Washington's New Income Tax: What Founders, Investors, Athletes, and High Earners Need to Know
- Washington's New Income Tax: The Complete Guide
