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

There is a closing window in Washington tax planning.

On January 1, 2028, Washington's new 9.9% tax on individual income above $1 million takes effect. With the referendum challenge effectively blocked and constitutional litigation uncertain, high earners should plan as though the tax will arrive on schedule.

The core principle is simple: income recognized before January 1, 2028 avoids the new tax. Income recognized afterward may not. Nearly every planning strategy below follows from that one 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 (SB 5813) — already in effect. A 7% rate on long-term capital gains above the standard deduction, and a 9.9% tier on gains 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 individual income above $1 million.

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 can be worth more than almost any other variable. A sale that lands in 2027 versus 2028 can be the difference of the entire 9.9% on the seven-figure slice. 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.

QSBS planning is unforgiving of mistakes and rewards early attention. If there's any chance it applies to you, this is the first call to make, not the last.

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. This is the most powerful lever and the easiest to get wrong: 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

Half-measures are worse than no measure. If you're going to do this, do it properly and early.

The sequencing problem: 2026 vs. 2027 vs. 2028

Each lever above is simple in isolation. The hard part is that they interact, and the order 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 the courts will fix it. The referendum is effectively blocked. Plan for the law as written.
• 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. The biggest mistakes are usually timing mistakes: 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, the worst thing you can do is nothing. Book a 20-minute call and let's map your window before it closes.

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.