Washington Millionaire Tax — What Seattle High Earners Should Do Before 2028

Governor Bob Ferguson put pen to paper on March 30, 2026, and Washington now has an income tax for the first time in state history. The new law hits individuals earning above $1 million in gross income with a 9.9% tax rate, starting with the 2028 tax year. If you are a senior tech employee, a business owner, or part of a dual-income household in Seattle that crosses into seven figures, you have about 21 months to rework your financial plan before the first dollar gets taxed.

Nearly everything published so far covers what the law says. This is about what you should actually do about it.

What the Washington Millionaire Tax Actually Says

The tax charges 9.9% on individual gross income that exceeds $1 million in a calendar year. Think of the $1 million as a standard deduction — you owe nothing on the first million, then 9.9 cents on every dollar after that. The threshold will eventually be indexed for inflation, though the starting point is a flat $1 million.

The provision getting the most attention is the marriage penalty. That $1 million deduction applies per individual filing, but it does not double for married couples. A married couple earning $1.2 million combined owes 9.9% on the $200,000 above the threshold — roughly $19,800 in brand-new state income tax. Two unmarried people each making $600,000 would owe absolutely nothing. CNBC called it a marriage penalty, and that label is accurate.

Several types of income are carved out. Proceeds from selling real property — your house, rental units, commercial buildings — are excluded. So are gains from selling a qualified family-owned small business. Retirement account distributions are also off the table. In practice, the tax lands squarely on earned income like salary, bonuses, and RSU vesting, along with non-real-estate investment gains.

Who in Seattle Is Actually Affected

Most people in Seattle will never touch this threshold. Earning $1 million in gross income puts you deep into the top 1% nationally. But in the tech corridors between South Lake Union and Bellevue, seven-figure total compensation packages are less unusual than the rest of the country might assume.

At Amazon, an L7 — that is Senior Manager or Principal level — with a few years under their belt can cross $1 million when you add up base salary, annual cash bonus, and RSU vesting. Amazon’s back-loaded 5/15/40/40 schedule means Year 3 and Year 4 vests can be enormous. Microsoft Principal and Partner-level roles with healthy stock grants are in the same territory. Google L6 and above, Meta E7 and above — all potentially in range.

Here is what it looks like in real numbers. A senior Amazon engineer pulling $350,000 base, a $50,000 cash bonus, and $650,000 in RSU vesting hits $1.05 million gross. Their new Washington tax bill: $4,950 (9.9% on the $50,000 above $1 million). If their RSU vesting runs heavier in a given year — say $900,000 in a Year 3 cliff vest — that bill jumps to $24,750. Real money, and it came out of nowhere for a state that has never taxed income before.

Business owners are in the crosshairs too. If your S-corp or partnership passes through more than $1 million to your personal return, the tax kicks in. Selling a business — unless it qualifies for the family-owned small business carve-out — could produce a massive one-time hit.

And then there is the marriage math. A dual-tech-income household where each spouse earns $550,000 owes $9,900 in state tax on their combined $1.1 million. If they were not legally married, each would be under $1 million individually, and the tax bill would be zero. That is a real number worth modeling.

Five Moves to Make Before January 2028

1. Pull income forward into 2026 and 2027. Right now, Washington charges zero income tax. Every dollar you can recognize before January 1, 2028, completely dodges the 9.9% rate. Holding in-the-money stock options? Exercise them this year or next — the spread gets taxed federally but not at the state level. If your employer has any flexibility on bonus timing or RSU acceleration, it is worth a conversation. You have 21 months. That window will feel shorter than you think.

2. Do your Roth conversions now, not later. Converting traditional IRA or 401k money to Roth creates taxable income in the year you do it. Right now, that income only faces federal tax. Push the same conversion to 2028 or beyond, and it adds to your gross income — potentially pushing you past the $1 million line and triggering the state tax on top of the federal. If Roth conversions have been sitting on your to-do list, there has never been a better time to check them off.

3. Revisit your business entity structure. If you own a business with pass-through income in the neighborhood of $1 million or higher, sit down with your CPA before year-end. There may be strategies around entity type, income timing, or how you take compensation that reduce your exposure. Every business is different — this is not a blog-post-level decision. Get professional advice tailored to your situation.

4. Front-load charitable giving through a Donor-Advised Fund. A DAF lets you make a large charitable contribution in one tax year, grab the full federal deduction immediately, and then distribute the funds to your chosen charities over time. Making a big DAF contribution in 2026 or 2027 lowers your federal tax bill right now. The Washington millionaire tax is calculated on gross income, so charitable deductions will not directly reduce it — but freeing up federal tax dollars gives you cash to cover the state bill when it arrives.

5. Model the marriage penalty. This is uncomfortable territory, but it is legitimate financial planning. If you and your spouse both pull high incomes and your combined gross exceeds $1 million — even though neither of you individually crosses the line — the tax applies. Consult a tax attorney about whether adjusting compensation structures, filing strategies, or other legal approaches could reduce the impact. Do not do anything rash. Just run the numbers so you understand exactly where you stand.

The Legal Challenge Wild Card

There is a real chance this law never takes effect. Tech investor and political activist Brian Heywood is organizing a referendum to put the millionaire tax directly in front of voters this November. If enough signatures come in and voters reject it, the whole thing dies. Beyond that, legal challenges are expected — though the Washington Supreme Court upheld the state’s capital gains tax in 2023 against a similar challenge, which suggests the courts may let this one stand too.

The smart approach is straightforward: plan as if the tax survives, but make moves that benefit you either way. Roth conversions, accelerated income recognition, and charitable giving are all solid financial planning regardless of what happens in Olympia. If the tax gets overturned, the worst-case scenario is that you made some smart financial moves slightly ahead of schedule. If it survives and you spent the last 21 months hoping it would go away, you are handing 9.9% of your income above $1 million to the state when you did not have to.

Washington’s tax landscape shifted permanently on March 30, 2026. The next 21 months represent a closing window where Seattle high earners can still make major financial moves without a state income tax applying. Once 2028 arrives, every dollar above $1 million costs 9.9 cents in state tax on top of your federal obligation. Start planning now.