2026 Washington Tax Update: Estate Tax and New Millionaire Tax

The 2026 Washington state legislative session brought significant tax changes, many of which have now been signed into law by Governor Bob Ferguson. These updates will directly impact high-net-worth individuals and families. In 2025, Washington increased the top estate tax rate from 20% to 35%, the highest in the nation. Following concerns about outmigration, that increase has now been reversed. At the same time, the state has enacted a new 9.9% millionaire tax on high-income individuals, signaling a broader shift in how Washington approaches taxation of wealth. Together, these changes create a more complex and evolving planning landscape. 

Estate Tax Rates Rolled Back  

Key updates under the new law¹:

Updated Washington Estate Tax Tables 

Key Considerations 

• Lower rates benefit larger estates: 
  Estates above $9 million will see a meaningful reduction in marginal tax rates. For example, a $14 million estate would owe approximately $2.6 million under current law versus $1.89 million under the new rates effective July 1, 2026. 
  
  
• More estates may become taxable: 
  The exemption is frozen at $3 million through 2027, fewer inflation adjustments will mean more residents are subject to the state estate tax.  
  
  
• A “split system” in 2026: 
  The 35% top rate still applies to individuals who pass away between July 1, 2025 and June 30, 2026, creating timing-driven differences and added complexity. 
  
  
• Policy uncertainty remains: 
  This reversal comes just one year after a major increase, underscoring how quickly Washington tax policy can change. 
  

Millionaire Tax 

In addition to estate tax changes, Washington has enacted a 9.9% tax on high-income individuals, commonly referred to as the “millionaire tax.” While details may evolve due to expected legal challenges, the current framework includes²:

• Applies to: Taxpayers with annual adjusted gross income (AGI) above $1 million, including wages, business income, capital gains, bonuses, and rental income. 
  
  
• Rate: 9.9% on income above the threshold 
  
  
• Effective date: Expected beginning in 2028 

Additional Considerations 

• Married v. Single Filers:  
  The $1m threshold applies regardless of filing status, it is not increased for married filers.  
  
  
• Interaction with capital gains tax: 
  Taxpayers may receive a credit for Washington capital gains tax paid (currently applied to long-term capital gains
  above $278,000 in 2026). 
  
  
• Legal uncertainty: 
  The tax is expected to face court challenges given Washington’s historical stance on income taxes. 
  

Conclusion 

Recent changes highlight how quickly Washington’s tax landscape is evolving, not just in estate taxes, but now in income taxation as well. The combination of estate tax updates, the capital gains tax, and the new millionaire tax creates a more complex environment for high-net-worth families. These developments reinforce the importance of thoughtful, integrated planning across both income and estate strategies. 

Now is an appropriate time to review your plan and ensure you are positioned appropriately under current, and potentially changing, law. Contact your wealth consultant if you’d like guidance on next steps. If you’re not currently a client and would like to connect, we invite you to complete our client compatibility survey.

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The information provided is general in nature and should not be considered legal or tax advice. Consult an attorney, tax professional, or other advisor regarding your specific legal or tax situation. The items included in this publication are our opinion as of the date of this piece, not all encompassing, and are subject to change without notice. This material has been prepared or is distributed solely for informational purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Any tax or legal advice contained in this communication is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. 

1. https://lawfilesext.leg.wa.gov/biennium/2025-26/Pdf/Bills/Senate%20Passed%20Legislature/6347.PL.pdf#page=1 ↩︎
2. https://lawfilesext.leg.wa.gov/biennium/2025-26/Pdf/Bills/Senate%20Passed%20Legislature/6346-S.PL.pdf#page=1 ↩︎