Washington's Millionaires Tax Explained for Homeowners

So a lot of people right now are making major real estate decisions based on Washington state's new income tax and most of them are missing a critical piece of the puzzle. So if you own a home in King or Snohomish County and you are wondering whether this new tax changes your math on selling, stay with me here because the answer might surprise you. Today I'm breaking down exactly what Washington's new millionaire's tax, actually does, and more importantly, what it does not do when it comes to selling your home. I've heard so many people in Spokane are thinking about heading 15 minutes east and going to Idaho. I mean, it's wild times what they're doing in the state, but I'm here to keep you updated on how it affects not only your plans to move, but also your property value. I am Emily Cressy. I'm a realtor and broker here with Keller Williams, Greater Seattle. My website is HomeProAssociates.com and you can register there to get my weekly email newsletter and keep you posted on what is happening in the market. And this question of the income tax is exactly the kind of thing I have been looking at for the last couple of weeks since this legislation was speculated on and then passed. And by the end of the video, we're going to know exactly what's in the law, what is excluded and why the market is moving the way it is right now. So you can make a clear headed decision instead of a reactive one. Let's start with what actually happened in March, 2026, Washington state passed Senate Bill 6346, which creates what's being called a millionaire's tax. It's actually a tax on income above a million dollars per year, per family. The reaction in the real estate market was pretty immediate. According to the NWMLS data tracked by Seattle Red, active listings across Washington jumped 64% above the historical average almost overnight. Luxury listings priced at $2 million and above surged 65% in a single week. King County saw a 40% year over year increase in homes listed at 5 million or more. This is really a lot of dramatic market shifting in that specific segment of the market. And if you're watching those numbers, it's understandable that you'd start asking yourself whether you need to act quickly or, you know, last one out, turn off the lights. That's what they told us when Boeing was having a lot of layoffs back in the nineties. I think everyone was leaving for California or something. They thought Seattle would completely empty out. One encouraging piece of the puzzle here is that real estate proceeds are excluded from the tax base of this new law. So if you sell your property, if you're married, the first $500,000 in profits is tax-free, but above that, any profits are considered capital gain, typically long-term capital gains, and they're taxed at that rate. They're not subject to this new income tax, which is great because if you have a multi-million dollar home and you sell your home in Washington state, the proceeds of that sale will not be taxed on your way out of the area. Now, of course, do remember that Washington has had a separate capital gains tax in place since 2021 that had a rate increase in 2025. I think that might be why Jeff Bezos left town, but for the Amazon owner, right? Home sales were exempted from that capital gains tax back in 2022, and that exemption is still fully intact. So that's something. The sale of your primary residence is at least not going to be subject to an additional 10% tax, but the tax does apply to forms of income above a million dollars per family, like wages, investment income, and business revenue. So if you are a high earner, maybe you just made a lot of money from working at a tech company, or you're a doctor, something like that, you're a sports player, you're a coach, right? There are a lot of highly paid people in this area. And then in that case, this is definitely a conversation worth having with your CPA or financial advisor because your broader financial picture matters a lot here. And if selling your home is a part of a larger relocation or tax strategy, and you're going to go to a state that doesn't have an ongoing income tax, the money from selling the home is not usually the most important thing, but how much you're going to be spending on that tax year over year if you continue to stay in Washington State. Now, it's possible that this state law will be repealed. There's a lot of people that are very upset about this, a lot of people who are fighting it, but there are also businesses that are leaving the state. There are high paid people that are living in the state. We all know about Starbucks having committed to going to Tennessee at this point. Boeing is expanding in South Carolina and not here. And I think a lot of small businesses are really struggling with this. So I do think it will have a negative impact on the economy. And I do think people are fighting it in terms of electing different judges who might be willing to overturn it if it gets to the Supreme Court in the state and also fighting it to repeal it. It was only passed. It's against our state constitution. It was only passed through saying it was an emergency. But I think the legality behind the law and its passage is certainly something that will continue to be contested. However, if it's going to cost you millions of dollars to stay here, you might want to get out sooner rather than later if you think that it's not for you anymore, regardless. I think for me, the passage of the law was largely a breach of trust. They're doing something that's in violation of the state constitution and that has been voted against by the people of Washington State a dozen times already. So they know we don't want it. And they're just spending a lot and they think this is going to be the solution. They said it was for millions of dollars of income or more. But the projection is that's going to be coming down and down to a lower and lower income cap where more and more people will be affected. Of course, a lot of other states have income taxes, but at 9.9 percent, almost 10 percent, this is going to be one of the highest state income taxes in the country. It's like we're California now, but without the good weather. And the tough thing is, if you do want to be out of the nexus of living in Washington State, the restrictions are pretty tight, like you can't live here for more than 30 days per year. So really getting rid of the house here is what the luxury homeowners and high income owners are having to do, which is why we're seeing a lot of those homes on the market. So it's stressful. It's frustrating. I think a lot of us are not impacted directly by the tax at this point, but we will be directed by the businesses and employers leaving the area and also the luxury home market will be softening. But if you are fed up with it, you're thinking about selling your house here in Lake Forest Park or surrounding areas like Kenmore, Shoreline, Edmonds, or really anywhere else in King or Snohomish County right now, then I am here to help. And the good news is we haven't had a huge shift in the number of people interested in buying what I would call regular homes or below median area homes. The last three or four listings that I've had, they're selling in like the $700,000 or $800,000 range, selling like gangbusters, lots and lots of offers, multiple offers, escalated prices, bidding wars. So I don't want you to feel like what's happening in maybe Medina is coming down to impact you too directly here in Seattle at this point. I do have a degree in economics. I really enjoy studying this stuff. I do think it will have a negative long-term impact on our area, but hopefully the mayor and the governor can kind of course correct before we really start circling the grain too much. That being said, AI is taking over the world. We only have a few years left anyway. Just don't worry about it. In the meantime, if you do want to buy or sell a home, you can always text the word home to me at 206-245-8813. Or you can go down below in the comments or the description of this video, I have a link there. You can book a chat time on my calendar for 30 minutes, and we can talk about whatever's on your mind, whether it's questions about these tax issues, buying or selling a home in the Seattle area, what's happening in your specific marketplace. Happy to have that conversation. Absolutely no cost or obligation. It's not a sales call, it's just a chance for us to meet and kind of have a cup of coffee together and chat about the market. So I'm here to help. And until then, I'll see you on the next video.