Washington’s new Millionaires’ Tax (SB 6346) is now law — and for high-income individuals, business owners, and families with ties to Washington state, the 2028 effective date is closer than it sounds. This article breaks down what the new 9.9% income tax means for high earners, what the companion estate tax bill (SB 6347) changes, and the planning steps REDW’s State and Local Tax team recommends taking now.
Why Should You Start Planning Now If the Tax Doesn’t Start Until 2028?
Washington’s new Millionaires’ Tax (SB 6346, signed March 30, 2026) will not take effect until 2028, but high-income individuals and families may want to start planning well before then. If you have substantial investment income, business income, equity compensation, or ties to Washington while living elsewhere, now is the time to understand how the law could affect you.
What the Law Actually Does
Senate Bill 6346 creates a new 9.9% tax on certain income over $1 million per year, starting January 1, 2028. The tax applies only to income above that amount — not the first $1 million — and it generally applies to Washington adjusted gross income over $1 million—but, the bill excludes certain categories, including the sale of qualified family-owned small businesses, the sale of residential and other real property, and some retirement-related income.
State lawmakers expect the tax to apply to fewer than one-half of one percent of Washingtonians. The revenue is intended to support programs designed to make life more affordable, including expanded tax credits for working families, free school meals for K-12 students, childcare funding, tax relief for small businesses, and sales tax exemptions on everyday essentials like diapers and some over-the-counter products.
This law may also matter if you live outside Washington but earn income connected to the state. For example, nonresidents who own part of a Washington business or receive Washington-source income may still need to pay close attention. That makes this especially relevant for REDW clients outside the state who have business or investment ties to Washington.
The Estate Tax Piece: SB 6347
A companion bill, SB 6347, makes a separate change to Washington’s estate tax. Beginning July 1, 2026, the top estate tax rate is scheduled to drop from 35% to 20%.
For high-net-worth individuals and families, that change may create planning opportunities before and after the new rate takes effect. If your estate could be subject to Washington estate tax, this is a good time to revisit your overall estate plan, gifting strategy, and trust structure to see whether any updates make sense.
What Should High-Income Earners Do Before 2028?
- Review your residency status
If you split time between Washington and another state, it is worth taking a closer look at where you are considered a resident for tax purposes. That question could become increasingly important under the new law. Washington uses a facts-and-circumstances test to determine residency, and the analysis can be more complex than simply counting days in the state. - Understand whether you have Washington-source income
Even if you do not live in Washington, income tied to a Washington business or investment may still create exposure. Business owners, investors, and executives with multistate income should not assume they are automatically outside the law’s reach. - Revisit your business structure
If you own an interest in a partnership, LLC, or S corporation, this may be a good time to look at how income flows through to you and whether your current structure is still the most tax-efficient option. - Think about the timing of major income events
If you expect a business sale, large bonus, stock option exercise, equity vesting, or other significant income event in the next few years, it may be worth exploring whether timing adjustments could help reduce future tax exposure. - Consider charitable giving strategies
Charitable giving may become even more valuable as part of a broader tax plan. If philanthropy is already part of your financial picture, there may be opportunities to pair your giving goals with tax-saving strategies. SB 6346 allows a charitable deduction of up to $100,000 against Washington taxable income, which may factor into your giving plan. - Coordinate income tax and estate planning
Income tax planning and estate planning work best when they are considered together. With both the new income tax and estate tax changes on the horizon, families with significant wealth may benefit from a coordinated review.
The Legal Uncertainty Factor
This law is expected to face legal challenges, and that is an important part of the conversation. Washington has a long history of legal and political debate around taxes tied to income, so it would not be surprising to see opponents challenge SB 6346 in court before the 2028 effective date. Washington’s constitution has a long-standing precedent that income is considered property and property must be uniformly taxed across all residents. However, many believe the tax will stand, pointing to the state’s capital gains tax as an example which was challenged on similar grounds but ultimately was upheld by the courts. (Quinn v. State of Washington, 2023)
Our view is simple: start planning now, but stay flexible. Good planning does not lock you into one path — it helps you understand your options and puts you in a better position to respond as the rules become clearer. For many clients, the biggest risk is not overplanning. It is waiting too long and losing the ability to act.
How REDW Can Help
REDW’s State and Local Tax (SALT) team helps high-income individuals, business owners, and families with multistate ties understand and plan for evolving state tax obligations, evaluating how these new rules may affect the tax picture, business structure, residency status, and estate plan. If you have high income, multistate connections, or Washington business interests, early planning can give you more choices and better outcomes. Contact our SALT team to begin a discussion on if and how Washington’s new income tax or estate tax changes may affect you.
About the Author – Meet Jeanna
Jeanna Schenk, CPA, MST
Senior Manager, State and Local Tax — REDW Advisors & CPAs
Jeanna specializes in state and local tax planning for businesses and high-net-worth individuals, including those across the Pacific Northwest and Southwest United States.
