In the past 12 months, among other things, Washington: (1) increased its estate tax rate to almost double that of any other state in the country, at 35%; (2) increased the capital gains tax by implementing a second tier of liability of 9.9% total tax; and (3) through its Governor, announced support for a new income tax. 

So, the question is: Do Washington state taxes have you thinking of moving away?

Maybe other things have you thinking of relocating and the new tax headlines are just the straw that broke the camel’s back. Perhaps you are lucky enough to own a second residence in Arizona or another state and think you can just spend a little more than half your time at your second residence to avoid Washington taxes. The analysis is more nuanced.

The tax burden headlines

Estate tax. The state of Washington imposes an estate tax on estates valued over $3 million. The amount of tax starts at 10% of the first million dollars above the $3 million exclusion amount and can go as high as 35% depending on the total value of the estate. Though the tax rate is high, the exclusion amount was also increased in the past 12 months, allowing a married couple to pass $6 million to their heirs estate-tax free with the use of a standard credit-shelter trust. The new law results in fewer Washington residents paying the estate tax.

Capital gains tax. The first $278,000 of capital gains per year isn't subject to capital gains tax. Only the amount over $278,000 is subject to the 7% tax, and the amount over $1 million is subject to an additional 2.9% tax. This tax is squarely aimed at the 1% crowd.

Income tax. There’s a long way to go before an income tax becomes a reality in Washington state, but it has some people worried. The headlines captured at the end of 2025 showed Gov. Ferguson supporting a millionaires' tax of 9.9% on incomes over $1 million, which applies to fewer than 0.5% of state residents.  

Can moving out of state help?

It can, but there are other considerations. One might be inclined to find another state with no income tax, no estate tax, and no capital gains tax. There are some of those, but every state needs a revenue source to provide essential government services. So, if the goal is to lower the overall individual tax burden, it makes sense to consider all the various taxes that states might impose. Think of items like sales tax or property tax. It might also be worth looking at the type of income. Some states that have an income tax might not tax your specific income stream or might tax it at a lower rate (e.g., Social Security).

Then consider what you might be giving up in the potential move to the state that you have calculated as having the lowest tax burden for your situation. There might be government services that are lacking. Or there might be commercial services that are lacking. 

For example, Wyoming has a lower tax burden than most states, but you might have a hard time addressing your health care needs as U.S. News & World Report ranks Wyoming well below Washington in health care. The point is that the three taxes listed are only part of the tax landscape across the country. And taxation overall is only a small part of the decision to live in a particular location. The result of this analysis is that the ever-expanding spreadsheet laying out all the variables to consider in making the decision to move quickly becomes unmanageable.

Consequences of moving

One important benefit available to citizens of the so-called community property states — of which there are currently nine — is the benefit of getting a step-up in tax basis on all community property after the death of a spouse. What this means is there is potential for big income tax savings after the death of a spouse because the tax basis of all community property gets stepped up to current fair market values, which can result in the reduction or elimination of income tax on capital asset appreciation, and avoid or mitigate Washington's capital gains tax. 

As a reminder, tax is assessed on the sale of a capital asset based on the difference between the tax basis and the amount paid. So, if tax basis is stepped up to current fair market value, that difference can become smaller or nonexistent. In non-community property states, only the assets owned by the decedent spouse are entitled to receive a step-up in tax basis. This is one big tax benefit to living in Washington.

What does one do? 

From a tax perspective, you should look for a state with the overall lowest tax burden for your specific circumstance. Of course, there are other factors to consider — things like community, family, and friends … or even health care. For a thorough analysis of your personal tax situation, you should consult a professional tax adviser. 

Beau Ruff is an attorney and director of planning at Cornerstone Wealth Strategies, headquartered in Washington state and servicing clients nationwide.