Washington State recently made several important changes to its estate tax laws. The Legislature also enacted a new tax on high annual income earners beginning in 2028. These laws impact different groups of people, so it is important to understand what each change means.
The Estate Tax Exclusion Returns to $3 Million
The estate tax exclusion amount is the maximum amount of assets you can pass to your beneficiaries without paying any Washington State estate tax. If you have more than $3 million in assets when you die, then the first the $3 million is not taxed by the state, but any amount over $3 million is taxed between 10-20%.
Washington’s estate tax exclusion amount has changed several times recently:
In July 2025, the Legislature increased Washington’s estate tax exclusion amount from $2.193 million to $3 million. This was in large part in response to the significantly rising house values. On January 1, 2026, an inflation adjustment increased the exclusion amount to $3.076 million. However, the Legislature just brought the exclusion back down to $3 million for anyone that dies on or after July 1, 2026.
How Did the Marginal Estate Tax Rates Change?
A marginal tax rate applies only to the portion of the taxable estate that falls within a particular bracket. It does not apply to the entire estate. The reduction was not limited to the highest marginal rate. These marginal tax rates show how much Washington State estate tax must be paid depending on how much over $3 million in total assets the person had.
The first $1 million (above that $3 million exclusion amount) remains subject to a 10 percent rate. However, every marginal tax rate above the first $1 million has decreased as of the changes on July 1, 2026:
- Over $1 million to $2 million: 14% (previously 15%)
- Over $2 million to $3 million: 15% (previously 17%)
- Over $3 million to $4 million: 16% (previously 19%)
- Over $4 million to $6 million: 18% (previously 23%)
- Over $6 million to $7 million: 19% (previously 26%)
- Over $7 million to $9 million: 19.5% (previously 30%)
- Over $9 million: 20% (previously 35%)
The most significant reduction occurred in the highest bracket, where the marginal tax rate dropped from 35% to 20%.
Who Is Impacted by the “Millionaires Tax”?
The name of the tax can be misleading. A person is not taxed simply because they have more than $1 million in assets.
Beginning January 1, 2028, the new law imposes a 9.9% tax on Washington taxable income. The law provides a $1 million standard deduction, so the tax generally applies only to households earning over $1 million in a given year. The 9.9% tax is only owed on the amount of household income over $1 million, not the entire amount of household income. Married couples and state-registered domestic partners share one combined $1 million deduction.
Why Does this Legislation Matter?
Although the lower marginal rates reduce potential estate tax, families still need to understand the filing requirements and how any tax owed may impact the assets passing to their beneficiaries. Separately, the “Millionaires Tax” presents a potential issue because it focuses on income received during a particular year, not accumulated wealth. An unusually high income year could make someone subject to the tax even if that person’s income is ordinarily below it.
The bottom line is that these changes make regular reviews of estate plans increasingly important. At Benjamin Law Group, we help our clients understand how changes in Washington law may impact short and long-term planning goals, and what strategies may be available to limit the amount of estate taxes.
