Washington's New 9.9% Income Tax: What High Earners Should Do Before 2028

Update (July 18, 2026): The repeal effort is on the ballot. Let’s Go Washington submitted 511,408 signatures on July 2, and the Secretary of State certified the measure for the November 3, 2026 ballot on July 15 — it will appear as Initiative 645. Full analysis: what the ballot measure changes (and what it doesn’t). The planning framework below still applies: the tax remains law, effective January 1, 2028, unless voters repeal it.

On January 1, 2028, Washington's new 9.9% tax on household income above $1 million takes effect. A repeal initiative (IP26-645) was certified for the November 3, 2026 ballot on July 15, 2026 (Initiative 645), but until voters or the courts say otherwise, high earners should plan as though the tax will arrive on schedule.

Income recognized before January 1, 2028 avoids the new tax; income recognized after may not. Most of the strategies below follow from that rule.

The rest of this guide is the framework behind that table. Each lever links to a deeper article, and the right combination depends entirely on your facts — think of this as the map, not the turn-by-turn directions.

First, know exactly what's coming

Two separate Washington taxes are now in play, and people constantly conflate them:

1. The capital gains tax (ESSB 5096; 9.9% tier added by SB 5813 in 2025) — already in effect. A 7% rate on long-term capital gains above the standard deduction, and a 9.9% tier on taxable gain over $1 million. This is not new in 2028; it's here now.
2. The 9.9% income tax (ESSB 6346) — effective January 1, 2028. It reaches household income above $1 million. Because that $1 million is per household, not per person, two-earner couples can cross it well below $2 million combined — the marriage penalty.

The trap is what happens when they stack. For a large 2028+ gain, you need to understand how these interact before you assume a single rate. (See the full breakdown on the Washington income tax guide and the capital gains tax guide.)

Who this is not for

If your annual income is unlikely to exceed $1 million and you do not anticipate a major liquidity event, many of these strategies will have limited value for you. This guide is written for founders with a pending exit, high earners with concentrated equity, and high-net-worth individuals weighing large conversions or distributions.

Lever 1: Pull income into 2026–2027, before the rate exists

This is the highest-value category for most people, because it's the most directly tied to the deadline.

• Time a large private-company gain. If you're approaching a liquidity event, when you close matters — but mostly for the ordinary-income pieces of the deal. Long-term gain above $1 million bears roughly 9.9% once whether it closes in 2027 or 2028 (the § 205 credit prevents stacking). The full 9.9% timing swing is on compensation, earnouts, and other ordinary income; gains in the 7% band pick up a 2.9-point layer from 2028. See the 2028 planning window for a big private-company gain.
• Run Roth conversions now. Converting traditional retirement funds to a Roth realizes income today — at today's rate — so future growth and withdrawals come out untaxed by the new regime. The math favors doing this before 2028. See Roth conversions before 2028.
• Reconsider installment sales and deferral. The usual instinct is to spread gain over future years. Under a rising-rate regime, deferral can backfire — you may be pushing income into the 9.9% years. See installment sales and deferred compensation.
• Accelerate equity income deliberately. Exercise timing for options, and the recognition events on RSUs, are levers you partly control. See stock option exercise timing.

Lever 2: Lock in the exclusion — QSBS

Pulling income forward saves you a rate. Excluding it entirely is better. For founders and early investors, Section 1202 (QSBS) remains one of the most powerful tools on the board, because it can exclude some or all of the gain from both federal and potentially Washington taxation, depending on the circumstances.

• Confirm whether your shares qualify and whether the exclusion shields you from the new Washington tax — this is not automatic. See does QSBS avoid Washington's 9.9% income tax.
• If you're inside the five-year hold and a sale is coming, a Section 1045 rollover can preserve the benefit.

If there's any chance QSBS applies to you, review it first — mistakes here are difficult to correct after the fact.

Lever 3: Reduce your permanent footprint — structure

Some moves aren't one-time accelerations; they change your annual exposure going forward.

• Pass-through entity (PTE) election. For owners of S corps, partnerships, and LLCs, the PTE mechanics can change how business income is taxed at the owner level. See Washington's income tax and pass-through business income.
• Trust planning — with a clear-eyed view of the limits. Trusts can play a role, but Washington has anti-avoidance rules, and aggressive structures invite scrutiny. See trust planning under Washington's income tax.
• Estate planning changes too. A state income tax shifts the calculus on gifting, timing, and where assets sit. See estate planning before 2028.

Lever 4: Push deductions and charitable timing into 2028+

The mirror image of Lever 1: a deduction is worth more in a year when the rate is higher. Charitable giving you were going to do anyway may be worth more if timed into the 9.9% years — while income-acceleration moves belong in 2026–2027. See charitable giving strategies. Coordinate this with tax-loss harvesting, which has its own timing logic.

Lever 5: The exit — leave Washington's reach entirely

For some high earners with a very large pending event, the most valuable move is to stop being a Washington taxpayer before the income is recognized. Domicile is a facts-and-circumstances test, and a sloppy move invites a residency audit.

• How to leave Washington's income tax
• The best states to relocate to
• Washington exit-tax planning before 2028
• Why passing the 30-day rule doesn't protect your stock sale

If you're going to relocate, do it properly and early — a partial move can create more audit risk than staying put.

The sequencing problem: 2026 vs. 2027 vs. 2028

The levers above interact, and the order in which you use them matters. Accelerate too much into one year and you stack your own income against yourself; spread it wrong and you walk into the 9.9% cliff. This is the part that genuinely requires a model of your specific situation. See cliff planning for 2026–2027.

The most common mistakes

• Assuming repeal will fix it. IP26-645 may reach the November 2026 ballot, but a ballot measure is a possibility, not a plan. Plan for the law as written and adjust if voters repeal it.
• Deferring income on autopilot. The old reflex to push income to future years is now often exactly backwards.
• Treating the two taxes as one. The capital gains tax and the income tax are different, and the 2028 interaction needs its own analysis.
• Waiting until late 2027. The best moves — QSBS, domicile, a well-timed exit — take months to set up correctly. The window closes faster than it looks.

Who should act now

If any of these describe you, the planning window is open and the clock matters:

• A founder or early employee with a liquidity event likely in the next 24–36 months.
• A high earner with concentrated equity, large RSU vesting, or deferred comp landing around 2028.
• A retiree or high-net-worth individual weighing large Roth conversions or distributions.
• Anyone whose income is likely to cross $1 million in any year from 2028 on.

Start here

There is no generic right answer — the correct plan is the one built around your numbers, your timeline, and your tolerance for complexity. Once income is recognized, many opportunities disappear permanently. For some founders, a single timing decision between 2027 and 2028 can be worth hundreds of thousands — or millions — of dollars.

If you have a 2028-sized decision in front of you, Book a 20-minute call and we can map out your options.

This post is general information, not legal or tax advice, and does not create an attorney-client relationship. Washington's tax laws are evolving and subject to ongoing litigation; the right strategy depends on your specific facts. Consult qualified counsel before acting.