Washington’s new 9.9% Millionaires Tax (SB 6346) takes effect January 1, 2028. High earners have a closing window to establish domicile in a no-income-tax state before the law becomes effective and eliminate the liability entirely.
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Without Domicile Change
Federal tax at the 37% top bracket applies to income above federal thresholds. Washington's 9.9% Millionaires Tax then applies to the $2,000,000 of household income above the $1M floor adding $198,000 in new annual state liability. The capital gains excise tax creates further exposure on top. No exclusion, no deferral, and the SALT cap largely eliminates any federal offset for this new state tax.
With Valid Domicile Change Before Jan 1, 2028
By establishing legal domicile in a no-income-tax state Nevada, Florida, Texas, Wyoming, or South Dakota before SB 6346's effective date, Washington's 9.9% Millionaires Tax does not apply. The $198,000 annual state liability is permanently eliminated. This saving compounds every year the taxpayer maintains valid out-of-state domicile.
| Metric | WA Resident (Post-2028) | Valid Domicile Change Strategy |
|---|---|---|
| Total Household Income | $3,000,000 | $3,000,000 |
| Federal Income Tax (37% bracket) | ~$929,600 | ~$929,600 |
| Washington Millionaires Tax (9.9% on income over $1M) | $198,000 | $0 |
| Washington Capital Gains Tax (7% / 9.9%) | Applies separately | Eliminated |
| Annual State Tax Savings | N/A | $198,000+ |
Annual Millionaires Tax Savings from a Valid Domicile Change (on $3M household income)
$198,000 / year
Calculation: 9.9% × ($3,000,000 − $1,000,000 household threshold) = $198,000. SB 6346 effective January 1, 2028; first payments due 2029. Figures are illustrative; individual results depend on income composition, entity structure, and sourcing rules.
Leaving Washington before the 2028 effective date is a legitimate and powerful strategy but SB 6346 contains specific provisions that create serious traps for taxpayers who do not plan carefully. These are the four failure patterns our advisors identify most often when reviewing a client’s residency change.
SB 6346 applies to income earned on or after January 1, 2028. A domicile change that is not legally complete before that date does not shelter any of that year's income. Taxpayers who delay until late 2027 risk incomplete documentation, missing audit-proof timelines, or having the transition invalidated under Washington's totality-of-facts domicile test which examines where your life is centered, not just where you filed a change of address.
SB 6346 explicitly extends to nonresidents with Washington-source income above the $1M threshold. If you move but continue operating a Washington business, receiving pass-through distributions from a WA entity, or earning compensation tied to Washington activity, the Millionaires Tax may still reach you. A domicile change alone may be insufficient without simultaneously restructuring or eliminating Washington-source income streams.
Unlike federal tax law, SB 6346 applies a flat $1 million per-household threshold regardless of filing status. Two spouses each earning $700,000 face full Millionaires Tax exposure on the $400,000 of combined household income above the cap while two unrelated individuals at the same earnings owe nothing. This asymmetry demands careful income-splitting analysis and entity structuring for dual-income couples before 2028.
The OBBBA raised the SALT deduction cap to $40,000, but that benefit phases back down to $10,000 for high earners the exact population subject to the Millionaires Tax. For most affected individuals, Washington's 9.9% state tax generates no meaningful federal offset. The PTET election (available to qualifying pass-through business owners) is the primary workaround: paying the tax at the entity level converts it into a deductible business expense and fully bypasses the SALT cap.
A valid domicile change that fully eliminates SB 6346 exposure requires more than a new mailing address. Each of these five requirements must be met and documented before the January 1, 2028 effective date.
Planning Checklist
5 / 5 Complete
Establish Legal Domicile in a No-Income-Tax State Before January 1, 2028
Qualifying destination states include Nevada, Florida, Texas, Wyoming, South Dakota, and Alaska all of which impose no state income tax and have no equivalent to SB 6346. The domicile change must be genuine, fully documented, and legally complete before the tax’s effective date. Moves executed in late 2027 carry the highest audit risk and require legal counsel to document properly.
Sever Washington Domicile Indicators Across All Material Audit Factors
Washington’s Department of Revenue applies a totality-of-facts test examining: voter registration, driver’s license, primary home, location of spouse and dependents, primary physicians, club memberships, vehicle registrations, bank relationships, and more. Every factor that remains anchored in Washington is evidence against a valid domicile change. An advisor should document severance across all material factors before the move is declared complete.
Audit and Restructure Washington-Source Income Before the Move
Because SB 6346 applies to nonresidents with Washington-source income, simply leaving the state is not enough if your income continues to originate here. Business interests, employment agreements, and pass-through entity distributions tied to Washington activity must be evaluated and potentially restructured to ensure no WA-source income exceeds the $1M threshold after the move is made.
Evaluate the PTET Election If Full Relocation Is Not Feasible
SB 6346 introduced a Pass-Through Entity Tax (PTET) election for partnerships, LLCs taxed as partnerships, and S-corporations. When a business elects PTET, it pays the Millionaires Tax at the entity level on behalf of qualifying owners making it a deductible business expense and bypassing the SALT cap. Owners receive state tax credits for their share of the entity-level payment. This is the primary mitigation available to those who remain in Washington.
Model the Interaction Between the Millionaires Tax, Capital Gains Tax, and Estate Tax
Washington’s Millionaires Tax coexists with the existing capital gains excise tax; taxpayers receive a credit for capital gains tax paid against their Millionaires Tax liability. This interaction affects the timing of asset sales and liquidity events. Washington’s estate tax (top rate now 20% following SB 6347) must also be modeled alongside the residency change since estate tax exposure is tied to domicile at death, not income year.
| Requirement | Criteria |
| Domicile change deadline | Legally complete before January 1, 2028 |
| Destination state | No income tax state (NV, FL, TX, WY, SD, AK) |
| WA domicile severance | All DOR audit factors documented and cleared |
| Washington-source income | Eliminated or restructured below $1M threshold |
| PTET election (if remaining) | Available to qualifying partnerships, LLCs, and S-corps |
The Millionaires Tax is signed and the clock is running. If your household earns over $1 million annually, the time to plan your domicile change is now not in 2027.
Washington SB 6346 takes effect January 1, 2028, with first tax payments due in early 2029. It imposes a 9.9% tax on household adjusted gross income exceeding $1 million. The tax applies to Washington residents, part-year residents, and critically nonresidents who have Washington-source income above that threshold. The law has been passed by both chambers and Governor Ferguson has signed it, though legal challenges from multiple groups are anticipated.
For most high earners, yes if the move is done properly. A valid domicile change removes your status as a Washington resident, which eliminates the primary basis for SB 6346 liability. However, the nonresident sourcing rules still apply if you earn income from Washington sources after the move a Washington-based business, a partnership with Washington operations, or compensation tied to Washington activity. Full elimination typically requires both a valid domicile change and a review and restructuring of income sourcing.
The two taxes coexist but do not fully stack. Washington’s capital gains excise tax applies at 7% on long-term gains above $278,000 and at 9.9% on gains above $1 million. SB 6346’s Millionaires Tax applies to total household adjusted gross income including capital gains above $1 million. Taxpayers receive a credit for capital gains excise tax already paid against their Millionaires Tax liability on the same income, preventing pure double taxation on investment gains. The two taxes must be modeled together when planning a liquidity event or business sale.
SB 6346 introduced a Pass-Through Entity Tax (PTET) election for partnerships, LLCs classified as partnerships, and S-corporations. When a business elects PTET, it pays the 9.9% Millionaires Tax at the entity level on behalf of qualifying owners making that payment a deductible business expense on the federal return. Owners receive Washington state tax credits for their share of the entity-level payment. Electing entities must file annual returns and make estimated payments beginning July 1, 2029. This structure is the most important mitigation tool for business owners who plan to remain in Washington after 2028.
Yes installment sales are one of the most effective planning tools for business owners facing a post-2028 exit. By structuring a sale so that proceeds are received across multiple tax years, each annual installment can potentially be kept below the $1 million household threshold, limiting or eliminating the 9.9% Millionaires Tax on each payment. This strategy requires careful structuring before the sale agreement is executed and is most effective when the total sale price is large enough to justify multi-year income distribution. It should be evaluated alongside the domicile change strategy, not as a substitute for it.
Disclaimer: This is not tax advice, and it is recommended to consult a tax professional, as every tax situation is unique.
