Seattle Tax Guide: No Income Tax, But Watch for the Capital Gains Tax

Seattle tech workers have long enjoyed Washington State's zero income tax policy. But the landscape shifted with the introduction of a 7% capital gains tax on gains exceeding $250,000. For Amazon and Microsoft employees with significant stock compensation, this changes the calculus.

Washington's Capital Gains Tax Explained

The 7% tax applies to capital gains exceeding $250,000 per year from the sale of stocks, bonds, and other capital assets. Real estate sales are exempt. For a tech worker selling $400,000 in vested RSUs, the tax would be 7% on $150,000 = $10,500.

Strategies to Minimize Capital Gains Tax

Consider spreading stock sales across multiple tax years to stay under the $250,000 threshold. Charitable giving of appreciated stock avoids capital gains entirely. Qualified Opportunity Zone investments can defer and reduce gains.

The Amazon and Microsoft Factor

With tens of thousands of employees receiving RSUs, the capital gains tax disproportionately affects Seattle's tech workforce. Plan your RSU sales strategically — selling in years when other gains are lower can keep you under the threshold.

No Income Tax Still Wins

Despite the capital gains tax, Seattle remains one of the most tax-friendly cities for high earners. A $200,000 salary in Seattle results in approximately $12,000 more take-home pay than the same salary in San Francisco, and $16,000 more than in Manhattan.