Washington State has introduced a new “millionaires tax,” signaling a major shift in its historically no-income-tax structure. Here are the key takeaways:
- New 9.9% tax on income over $1 million
The tax applies to Washington taxable income exceeding $1 million, with a standard $1M deduction built in. - Effective starting in 2028
The tax would apply to income earned beginning January 1, 2028, with first payments due in 2029. - Applies broadly to high earners, including founders and investors
It can impact not only residents, but also individuals with Washington-source income such as business owners, investors, and those with liquidity events. - Stacks with existing capital gains tax changes
Washington already taxes capital gains, with higher rates on gains above certain thresholds, increasing the overall tax burden on large transactions. - Significant implications for liquidity events and M&A timing
Founders, executives, and investors may face materially higher tax exposure on exits, equity compensation, and large income events, making timing and structuring more critical than ever. Advance planning is essential to maximize what you actually get to keep in an exit.
To learn more about how this may impact planning for an M&A transaction, please reach out to John O’Dore or Ed Kirk for a confidential conversation.
