Washington used to be simple, at least on the tax front. No income tax, no estate tax to speak of, and capital gains that stayed out of the state's reach. That framework has shifted piece by piece since 2021, and by 2028 it will have shifted completely. For business owners, equity holders, and retirees planning a sale, an exercise, or a transfer of wealth, three separate taxes can now reach the same event. Understanding how they stack, and when is the first step in building around them.
Three Taxes, One Event
Capital gains tax. In effect since 2022, this tax applies to gains above $278,000, with a 7% rate on the first $1 million above the standard deduction. A 9.9% surcharge, added in 2025, applies to gains above that $1 million mark.
Estate tax: Washington's estate tax carries a top rate of 20% and applies to estates above a $3 million exemption. As of July 2026, that exemption rolled back, and - notably - there is still no spousal portability, meaning each spouse's exemption must be captured individually or it's lost.
The millionaire's tax: Effective January 1, 2028, this new 9.9% tax applies to household income above $1 million.
Individually, each of these is a known quantity. Layered together, they change the math on a single large transaction. A business sale, a concentrated stock position, or a wave of ISO exercises can trigger the capital gains tax and its surcharge today, and - depending on timing - the millionaire's tax once it takes effect. For estates above the exemption, the 20%
rate applies on top of whatever income-side taxes were already due. The state's tax code was not designed with a single filing in mind, but for many high-net-worth households, a single filing is exactly where all three now meet.
The Planning Window: 2026–2027
Washington's tax changes are landing on a timeline, and that timeline creates a window:
The stretch between the estate tax change and the millionaire's tax effective date is narrow - roughly eighteen months - but it's the last period in which gain timing, trust structures, and equity plans can be reviewed before a third tax enters the picture.
Consider a hypothetical: Client A, a business owner weighing a sale, currently faces capital gains tax and the 9.9% surcharge on proceeds above $1 million. If that sale slips past January 2028, the same proceeds could also fall under the millionaire's tax, depending on Client A's total household income that year. The tax owed on an identical transaction can differ meaningfully depending on which side of that date it falls.
Strategies Worth a Conversation
None of these are one-size-fits-all, and suitability depends on individual facts and circumstances, but they're the levers most commonly discussed in this environment:
Where to Start
If any of this touches your situation, four steps are worth prioritizing now:
Washington's tax landscape will likely continue to evolve, including through pending legal challenges to some of these provisions. That uncertainty is itself a reason to build plans that can flex - reviewed periodically rather than set once and left alone
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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.
