Washington is about to become a high-tax state for high earners — and if you haven’t started modeling your 2028 liability yet, you are already behind.
With the passage of SB 6346, Washington is introducing a 9.9% tax on “Washington taxable income” beginning January 1, 2028. This isn’t a minor adjustment. It is a fundamental shift in the state’s tax architecture. For those earning over $1 million, the difference between acting in 2026 and waiting until 2028 could easily reach six figures per year.
The “Bifurcated” Landscape
Washington’s new system creates a striking bifurcation: punishing rates on earned income running alongside a near-zero-tax path for qualifying equity.
A physician or tech executive earning $3 million will face a combined federal and state effective rate exceeding 40%. Meanwhile, a founder selling a startup for $15 million could potentially owe zero in both federal and state taxes — through the Qualified Small Business Stock (QSBS) exclusion, which the One Big Beautiful Budget Act (OBBBA, pending law as of this writing) would enhance further. In this new era, understanding which “bucket” your income falls into is the entire game.
The $1 Million Cliff — and the Marriage Penalty
The $1 million threshold is not a graduated bracket. It is a cliff. Cross it, and the full 9.9% applies to every dollar of Washington taxable income above that million-dollar deduction.
Washington is also introducing what may be the largest marriage penalty in the country. The $1 million standard deduction applies per household — it is not doubled for married couples. For a dual-income household where each spouse earns $1 million, the penalty for being married is a staggering $99,000 in additional state tax that two single filers in the same position would not owe.
This is not a planning edge case. It is a structural feature of the law that will hit a significant number of Seattle-area households starting January 1, 2028.
The Top 5 Moves to Make Before 2028
Most high earners will overpay in 2028 not because the law is unclear, but because they waited too long to plan. Here is what you should be doing now.
1. Get a Washington Tax Model — This Year
Don’t rely on rough estimates of your AGI. Washington’s tax base has specific modifications that can significantly shift your numbers. A proper model takes a few hours to build and can reveal whether you have a problem at all before you invest in solving it.
2. Verify Your QSBS Eligibility
If you hold startup equity, document your QSBS status now. To qualify, stock must be in a domestic C-corporation, acquired at original issuance, held for at least five years, and meet active business and gross asset tests — among other requirements. This is not a blanket exemption, but for those who qualify, a $15 million exit could be entirely free of both federal and Washington state tax. The time to confirm eligibility is before a liquidity event, not after.
3. Maximize Retirement Contributions
For those near the $1 million cliff, a cash balance plan can shelter $150,000 to $300,000 or more annually. Structured correctly, this can eliminate your Washington tax liability entirely while also reducing your federal bill. The math is compelling; the setup requires lead time.
4. Evaluate the Pass-Through Entity Election
If you own an S-corp or LLC, electing to pay the state tax at the entity level makes it federally deductible. For a taxpayer in the 37% federal bracket, this reduces the effective after-federal cost of the 9.9% state tax to roughly 6.2%. That’s a material difference on large pass-through income — and the election is straightforward to execute if you plan ahead.
5. Get Serious About Domicile
A genuine move to a no-income-tax state is the only binary lever that eliminates the exposure entirely. But the word “genuine” is doing a lot of work here. Keeping a Seattle home, a Washington-based physician, or a local country club membership creates audit risk. The Department of Revenue has seen every version of this and will look hard at high earners claiming out-of-state domicile. If you are going to do this, do it correctly — with a real change in your center of life, not a mailbox in Nevada.
The Window Is Closing
The critical planning window is 2026 and 2027. Retirement plans take time to establish. A genuine domicile change requires months of documented behavioral shifts. QSBS eligibility requires years of holding period. None of these strategies can be bolted on in December 2027.
The bottom line: If you expect to earn over $1 million — or have a significant liquidity event on the horizon — ask your advisor to model your 2028 Washington taxable income today. The law is clear. The planning tools exist. What’s scarce is time.
