Does Washington Tax Retirement Income? Social Security, Pensions, IRAs and 401(k)s

Does Washington tax retirement income? Historically, Washington has had no broad individual income tax, so retirement distributions were not taxed at the state level as ordinary income. That changes under ESSB 6346: a 9.9% income tax begins January 1, 2028. Under that law, federally taxable retirement income—including the taxable portions of Social Security, pensions, and traditional IRA and 401(k) withdrawals—can enter the Washington calculation unless a federal exclusion, return of basis, qualifying rollover, or other protection applies. Qualified Roth IRA and Roth 401(k) distributions generally do not. There is no general retirement-income exclusion. Whether tax is due depends on total income after Washington’s statutory adjustments, deductions, and credits—not the size of a retirement withdrawal alone. Full-year residents start with a $1 million standard deduction per individual; spouses and registered domestic partners share one.

Status (as of September 21, 2026): ESSB 6346 remains enacted law, effective January 1, 2028, unless repealed or struck down. Initiative 645 (certified in July 2026) is on the November 3, 2026 ballot and would repeal the income tax if it passes; constitutional litigation is also pending. Follow the tracker for election and litigation developments rather than this post. Implementing regulations from the Department of Revenue are still to come. Treat everything below as a planning baseline under enacted law — and confirm specifics with your own tax advisor.

Qualifications apply: residency and part-year rules, AGI composition, Washington adjustments/deductions/credits, and federal protections such as 4 U.S.C. §114. This table is not a categorical “taxed / not taxed” answer.

Here's how the statute actually works for each type of retirement income, and who needs to pay attention.

(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.

Washington Taxes for Retirees Beginning in 2028

Washington starts with federal adjusted gross income, applies the statutory modifications that produce Washington base income, and then computes Washington taxable income after further adjustments and the $1 million standard deduction. The 9.9% rate applies to that Washington taxable income—not to “AGI above $1 million” as a casual shorthand. Under §302, long-term gains and losses are removed first; for taxpayers owing the capital gains tax, §302(3) adds back Washington-taxed gains plus that tax’s standard deduction, while preserving specified exemptions. Other modifications and deductions also apply, including the pass-through tax-expense addback in §310.

The statute has no general exclusion for retirement income. Determine the federally taxable portion first, then apply the Washington rules. Federal exclusions, return of basis, qualifying rollovers, and protections for covered nonresident retirement income can matter. Federal AGI is the starting point, not the final Washington tax base.

For a full-year resident, retirement income included in federal AGI generally uses the same deductions as other income. The 9.9% rate applies to Washington taxable income after the statutory calculation, with credits applied afterward. See ESSB 6346, §§101, 201, 301–316, and 401–407.

Does Washington Tax Social Security?

Social Security benefits receive partial protection — but it comes from the federal tax treatment, not from Washington.

The federally taxable portion of Social Security is calculated under a formula; it is not restricted to exactly 0%, 50%, or 85%. Depending on filing status and combined income, up to 50% or up to 85% of benefits may be taxable. The calculation generally includes other income, tax-exempt interest, and half of the benefits. Only the portion included in federal AGI enters Washington’s starting base.

Because Washington's new personal income tax starts with federal AGI, Washington taxes only the portion of Social Security benefits that the federal government includes in AGI. If your provisional income is low enough that none of your Social Security is federally taxable, none of it enters the Washington tax base either.

High-income recipients generally have 85% of Social Security benefits included in federal AGI. That inclusion can increase Washington taxable income, but the actual state tax depends on Washington’s adjustments, available deductions, and credits. Crossing $1 million of federal AGI does not by itself mean each dollar of benefits is taxed at 9.9%.

The practical reality: Social Security benefits max out at $62,172 per year in 2026 ($5,181 per month for a maximum earner claiming at age 70, per the Social Security Administration). Even at 85% inclusion, that's roughly $53,000 added to AGI. On its own, Social Security is highly unlikely to push someone over the $1 million threshold — but it does add to the pile for someone who's already close.

The 15% of benefits that are never federally taxable remain outside Washington’s base regardless of income level.

Does Washington Tax 401(k) Withdrawals and IRA Distributions?

Traditional IRA and 401(k) distributions enter federal AGI only to the extent taxable. Nondeductible IRA basis and after-tax contributions to employer plans can make part of a distribution nontaxable; qualifying rollovers can defer income entirely. The taxable portion generally enters Washington base income, subject to the statute’s applicable rules.

This matters most in three scenarios:

Required minimum distributions (RMDs). Starting at age 73 (or 75 for those born in 1960 or later), the IRS requires withdrawals from traditional retirement accounts. For someone with a large traditional IRA — say $10 million accumulated over a career — RMDs alone can exceed $400,000 per year. Combined with other income sources (Social Security, pensions, investment income), this can push federal AGI well past the $1 million standard deduction (per individual; spouses share one).

One-Year Distributions and the "Millionaire" Label

Having $1 million or more in retirement savings does not mean that a large withdrawal makes the recipient a "millionaire" in the ordinary income sense. Wealth and one-year taxable income are different concepts. A substantial account balance can support ordinary living expenses for years and still produce a very large taxable distribution in a single year.

Common reasons for a massive one-year taxable distribution include:

• Retiring and taking a lump-sum distribution from a plan or IRA
• Major medical or long-term care costs
• Buying a retirement home or paying off a mortgage
• Divorce or property settlement
• Inherited IRA distributions
• A large Roth conversion
• Required minimum distributions
• Death, disability, or a financial emergency

A large retirement distribution can create a very large taxable event in one year. Washington's income tax under ESSB 6346, beginning in 2028, has no income averaging or smoothing mechanism. Washington taxable income that remains after the $1 million standard deduction (spouses and registered domestic partners share one) is taxed at 9.9%.

Only the federally taxable portion of a distribution enters the Washington calculation. Basis recovery, qualifying rollovers, and qualified Roth distributions generally do not. Whether Washington tax is due depends on the taxpayer's total Washington calculation for the year—not on the withdrawal alone—and can arise even when ordinary annual income is well below the deduction.

Roth conversions. Only the taxable portion enters federal AGI. A fully taxable $500,000 conversion plus $600,000 of other income included in Washington’s base produces $100,000 of Washington taxable income for a full-year resident with the full $1 million deduction and no other adjustments, deductions, or credits. The resulting 2028 Washington tax is $9,900.

Does Washington Tax Roth IRA Withdrawals?

Qualified distributions from Roth IRAs and designated Roth accounts, including Roth 401(k)s, are excluded from federal AGI and generally do not enter Washington base income. Nonqualified withdrawals require a separate calculation; any federally taxable earnings can enter Washington’s base.

For Roth IRAs, five years alone is not enough to make every withdrawal qualified. The qualified-distribution rules also require age 59½, disability, death, or the limited first-home exception. Separate ordering and conversion-penalty rules govern nonqualified withdrawals. Roth 401(k) distributions have their own qualification rules.

A $2 million qualified Roth IRA distribution is excluded from federal AGI and generally does not enter Washington base income. By comparison, a fully taxable $2 million traditional IRA distribution would produce $99,000 of Washington income tax in 2028 for a full-year resident with the full $1 million deduction and no other income, adjustments, deductions, or credits. Other facts change that comparison.

Does Washington Tax Pension Income?

The taxable portion of pension payments from defined benefit plans—including government and corporate pensions and generally military retirement pay—enters federal AGI and Washington’s starting base. After-tax employee contributions can make part of a pension payment a nontaxable return of basis.

Federal pension protection. 4 U.S.C. §114 protects covered retirement income when the recipient is neither a resident nor domiciliary of the taxing state. Simply leaving Washington or changing domicile does not establish that both conditions are met. Confirm statutory residency and the type of payment.

State government pensions. Washington state employees receiving PERS, TRS, LEOFF, or other state retirement system benefits will have those payments included in their Washington base income if they remain Washington residents. For most state retirees, the $1 million threshold means no tax will be owed. But a retired state employee with a large pension who also has significant investment income or other retirement accounts could be affected.

Military retirement pay. Retirement pay based on age or length of service is generally federally taxable and enters Washington’s starting base to that extent. Qualifying military disability retirement payments may be wholly or partly excluded from federal income, and VA disability compensation is excluded. Distinguish these benefits before calculating the taxable amount. Washington’s adjustments, deductions, and credits then determine whether state tax is due.

Annuity Payments

The taxable portion of annuity payments (the amount included in federal AGI after excluding the return of basis) flows into Washington base income. There is no Washington-specific exclusion for annuity income.

Who Actually Needs to Worry?

The starting $1 million standard deduction is an important protection for full-year Washington residents. Spouses and registered domestic partners share it; see the marriage-penalty explanation. Federal AGI alone is not a reliable cutoff because Washington has additions, subtractions, other deductions, and adjustments for taxpayers who are not residents for the entire year.

Most retirees will never approach this threshold. A one-year spike from a large retirement distribution can also create exposure even when ordinary years stay well below the deduction. But several profiles are at risk:

To model your own AGI against the $1 million deduction, estimate your exposure here.

Retired tech executives with large traditional IRA and 401(k) balances may have substantial required distributions. For an IRA owner age 75 whose prior-year December 31 balance is $5 million, the Uniform Lifetime Table divisor of 24.6 produces an RMD of approximately $203,252 ($5 million ÷ 24.6). A different table applies if the sole beneficiary is a spouse more than 10 years younger. The withdrawal percentage generally rises with age, but the dollar amount also depends on the account balance; it does not necessarily increase each year.

Retired business owners with substantial retirement-plan savings, ongoing taxable business income, pensions, or deferred compensation. Ordinary business-sale proceeds cannot simply be rolled into an IRA; retirement-plan contributions and rollovers have separate eligibility rules and limits.

Retirees with significant investment portfolios generating dividend and interest income that, combined with retirement distributions, exceeds $1 million.

Anyone doing a large Roth conversion in a single year, especially if they have other income that puts them near the threshold.

Retirees moving to Washington should distinguish income recognition from transactions inside an account. A taxable Roth conversion or retirement distribution can affect the income-tax calculation. An ordinary stock sale inside a traditional IRA generally does not create current income to the owner, and a properly structured transfer to an IRA annuity need not be taxable. Changing domicile or residency can affect Washington tax on retirement income, but the result depends on the statute’s residency and part-year residency rules, sourcing rules for nonresidents, and any federal preemption (including 4 U.S.C. §114) that applies to that income. Being outside Washington on the day of a particular distribution does not by itself eliminate Washington tax.

Pre-2028 Planning: The Roth Conversion Window

The pre-2028 conversion window is worth modeling when a later conversion would create additional Washington income tax. It is not an expiration date for Roth conversions, and converting early is not automatically the best result.

Compare conversion years. Recognizing conversion income before Washington’s tax takes effect can avoid Washington income tax on that conversion income, assuming the law takes effect as enacted and the taxpayer’s circumstances would otherwise produce Washington tax after 2027; federal tax and any applicable tax in another state still matter. A fully taxable $3 million conversion in 2028 would produce $198,000 of Washington income tax for a full-year resident with the full $1 million deduction and no other income, adjustments, deductions, or credits. A multi-year schedule after 2028 might also avoid that state tax if each year has enough unused deduction room. Pre-2028 conversion is not universally the best move—federal brackets, IRMAA, RMDs, estate plans, basis, and residence also matter.

Compare multi-year schedules. Splitting a conversion across years can reduce federal tax by using lower brackets more than once. Include years after 2027 in the comparison where appropriate. Each year’s Washington calculation must include other income and the available deductions.

Check both Roth IRA five-year rules. The qualified-distribution rule requires five tax years plus age 59½ or another qualifying condition. Separately, a conversion can trigger a 10% recapture tax if its taxable portion is withdrawn within five tax years while you are under 59½, unless an exception applies. Ordering rules determine which dollars come out first. A 2026 conversion’s separate five-tax-year period ends on January 1, 2031.

Model total tax, not just the Washington saving. Compare the incremental federal cost of accelerating a conversion with the projected federal and state costs of converting later or taking future distributions. Include other income, IRA basis, expected returns, Medicare premiums, and funds available to pay the tax.

The Interaction with Washington’s Capital Gains Tax

Retirees with investment portfolios face an additional layer: Washington’s existing capital gains tax (chapter 82.87 RCW) taxes long-term capital gains above the standard deduction ($278,000 for tax year 2025, indexed) at 7%, with a 2.9% surcharge producing a 9.9% top rate on taxable gains above $1 million.

Under ESSB 6346 §302(1)–(2), long-term capital gains included in federal AGI are stripped and long-term capital losses are added back. §302(3) then adds back Washington capital gains subject to tax under chapter 82.87 RCW plus the amount deducted under RCW 82.87.060(1)—but only for taxpayers owing tax under chapter 82.87 RCW for that taxable year. §205 then allows a nonrefundable credit for capital gains tax paid, capped at the income tax due. When the §302(3) addback applies, and ignoring other credits, combined Washington liability equals the greater of the capital gains tax and the pre-credit income tax. If no capital gains tax is owed, the §302(3) addback does not apply. Retirees with both large retirement distributions and significant capital gains can still owe tax under both regimes. Full mechanics: Washington Capital Gains Tax vs. the New 9.9% Income Tax.

Illustration using the published 2025 capital-gains deduction solely to show the interaction (not a forecast of the 2028 deduction): assume a full-year resident has $800,000 of fully taxable IRA distributions and $500,000 of nonexempt long-term gains allocated to Washington, with no other income, adjustments, deductions, or credits beyond those shown. Capital-gains tax is ($500,000 − $278,000) × 7% = $15,540, so §302(3) applies. §302(1) strips the $500,000 gain; §302(3) adds back $222,000 + $278,000 = $500,000. Washington base income is therefore $800,000 + $500,000 = $1.3 million. After the $1 million income-tax standard deduction, Washington taxable income is $300,000. Pre-credit income tax is $300,000 × 9.9% = $29,700; the §205 credit reduces income tax by $15,540 to $14,160. Total Washington tax is $15,540 + $14,160 = $29,700 (equal to the pre-credit income tax). Use the applicable indexed capital-gains deduction for the actual tax year.

The Bottom Line for Washington Retirees

Washington’s new income tax does not single out retirement income for special treatment — good or bad. Retirement distributions are simply part of federal AGI, which is the starting point for Washington base income. The $1 million standard deduction protects the vast majority of retirees, but those with large traditional retirement accounts, significant pension income, or plans for Roth conversions need to model the impact.

Start with the year-by-year calculation. Determine each conversion’s taxable portion, combine it with other income, and apply Washington’s adjustments, deductions, and credits. Then compare early conversion, later conversion, and a multi-year schedule. The right answer depends on the complete tax cost, not a blanket instruction to convert before 2028.

Frequently asked questions

Does Washington tax Social Security?

Starting in 2028 under enacted law, the federally taxable portion of Social Security—up to 85%—enters Washington’s calculation. No Washington income tax is due if income after statutory adjustments and deductions leaves no taxable income. The standard deduction starts at $1 million for a full-year resident individual, shared by spouses and registered domestic partners.

Does Washington tax 401(k) and IRA withdrawals?

Starting in 2028, the taxable portion of a traditional 401(k) or IRA distribution generally enters Washington base income. After-tax basis and qualifying rollovers can affect federal inclusion. Other income, Washington adjustments, deductions, and credits determine the state tax; a withdrawal below $1 million is not automatically sheltered. Qualified Roth distributions generally remain outside the base.

Does Washington tax pensions?

The federally taxable portion of a pension generally enters the calculation for a Washington resident beginning in 2028. After-tax contributions can make part of a payment nontaxable. Washington adjustments, deductions, and credits determine the bill. Federal law protects covered retirement income when the recipient is neither a resident nor domiciliary of Washington.

Does Washington tax retirement income for most retirees?

Many retirees will owe no Washington income tax because their income after statutory adjustments and deductions leaves no taxable income. There is no general retirement-income exclusion. Large taxable distributions, conversions, or other income can change the result, and spouses and registered domestic partners share the standard deduction.

Can I avoid Washington's tax on retirement income by moving?

Potentially, for future covered retirement income. Under 4 U.S.C. §114, Washington cannot tax covered retirement income of someone who is neither a Washington resident nor domiciliary. Changing domicile alone is not enough if you still meet the statutory resident test, and being outside Washington on the day of a distribution does not by itself eliminate Washington tax. Confirm residency and domicile, the payment’s qualification under the federal definition, part-year and sourcing rules, and any other applicable adjustments before relying on a move.

Planning for retirement in light of Washington’s new income tax? Book a 20-minute intro call to discuss how ESSB 6346 affects your specific retirement accounts and timeline. Also see: Washington State Taxes Guide | Income Tax Planning Guide for High Earners.

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This post is for educational purposes only and is not legal or tax advice. Consult a qualified attorney about your specific situation.