Tool | September 2016

State-by-State Guide to Taxes on Retirees

Our comprehensive guide to taxes on retirement income, property and purchases, as well as special tax breaks for seniors, in every state.

Washington

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The Bottom Line
Map of Washington

Tax-Friendly

The Evergreen State is one of seven states with no broad-based personal income tax. Therefore, retirees don't have to worry about paying taxes on their pensions, Social Security benefits or other retirement income. However, combined state and local sales tax rates are some of the highest in the nation, up to 9.5%. The state offers some property tax relief programs.

State Sales Tax

6.5% (food and prescription drugs are exempt); local option taxes may increase the total tax to 9.5%. The sale or lease of a motor vehicle is subject to an additional tax of 0.3% of the selling price.

Income Tax Range

Washington has no state income tax.

Social Security

Benefits are not taxed.

Exemptions for Other Retirement Income

Retirement income is not taxed.

IRAs

Retirement income is not taxed.

401(k)s and Other Defined-Contribution Employer Retirement Plans

Retirement income is not taxed.

Private Pensions

Retirement income is not taxed.

Public Pensions

Retirement income is not taxed.

Property Taxes

Median property tax on Washington's median home value of $250,800 is $2,743, according to the Tax Foundation.

Tax breaks for seniors: Washington has four property tax relief programs available for homeowners who meet the individual program requirements: the Property Tax Exemption Program for Senior Citizens and Disabled Persons, the Property Tax Deferral Program for Senior Citizens and Disabled Persons, the Property Tax Deferral Program for Homeowners with Limited Incomes, and the Property Tax Assistance Program for Widows or Widowers of Veterans.

The Property Tax Exemption Program is available to people who are 61 or older or disabled by the year before the property tax is due. The property must be owner-occupied, and household income must be $35,000 or less. For qualified applicants, the home is exempt from all voter-approved excess and special levies. In addition, if household income is $30,000 or less, a portion of the regular property tax amount may be exempt. When household income is between $25,001 and $30,000, the exemption also applies to the regular levies on the first $50,000 or 35% of the home's assessed value, whichever is greater (but not more than $70,000 of the assessed value). When household income is $25,000 or less, the exemption applies to the first $60,000 or 60% of the home's assessed value, whichever is greater.

Seniors 60 or older and disabled persons who have income of $40,000 or less may also qualify for the state's tax-deferral program. This program works in conjunction with the exemption program, and it allows qualified applicants to defer property taxes or special assessments on their residence. The state pays the taxes on behalf of the applicant and files a lien to indicate that the state has an interest in the property. The deferred taxes, plus 5% interest, must be repaid to the state when the owner passes away, sells or moves from the home.

There is also a property-tax deferral program for those who make more than $40,000. The deferral program for homeowners with limited income is available for homeowners with combined disposable income of $57,000 or less, and there is no age or disability requirement. This program allows homeowners to defer half of their property taxes annually. The deferred amount accrues interest until it's repaid (the interest rate for 2015 deferrals is 2%). Deferrals must be repaid when the home is sold, the applicant passes away or the home is no longer used as the primary residence.

The state also has a property tax assistance program for spouses of deceased veterans. It applies to a widow or widower of a veteran who was 100% disabled, a disabled former prisoner of war, or a veteran who died on active duty or as a result of a service-connected disability. The surviving spouse must be 62 or older, disabled, own a primary residence in the state and have income of $40,000 or less. He or she receives a grant based on income, the value of the residence and local levy rates. The grant does not have to be repaid as long as the applicant continues to live in the residence until at least December 15 of the year it is received.

Inheritance and
Estate Taxes

There is no inheritance tax, but estates in excess of $2 million must file a Washington estate-tax return. Tax is due only on the amount above $2 million, with an additional $2.5 million deduction for family-owned businesses valued at less than $6 million. Estate-tax rates range from 10% to 20%.