Washington tax nuance for ESSB 6346
A startup‑law explainer lays out that Washington's new tax under ESSB 6346 begins with federal adjusted gross income, creating planning questions about what counts as Washington taxable income. A companion explainer flags a hidden limitation in the state's capital‑gains charitable deduction because not all charities qualify. (thestartuplawblog.com) (thestartuplawblog.com)
Washington’s new millionaire tax starts with a federal income number, not a Washington-only one, and that sets up fresh planning fights before the tax begins in 2028. (app.leg.wa.gov) Governor Bob Ferguson signed Engrossed Substitute Senate Bill 6346 on March 30, 2026, after the Senate passed it March 11 and the House passed it March 9. The bill summary says the measure is now Chapter 238, Laws of 2026. (app.leg.wa.gov) Legislative bill reports say the new tax uses federal adjusted gross income as its starting point, then applies Washington-specific additions, subtractions, deductions and credits. RSM US said the tax takes effect for tax years beginning on or after January 1, 2028, with first returns and payments due in 2029. (lawfilesext.leg.wa.gov) (rsmus.com) That starting point matters because federal adjusted gross income is broad. Senate and House bill reports describe it as total income from taxable sources minus limited adjustments, and Stokes Lawrence said it can include wages, business income, interest, dividends, rents, royalties, retirement distributions and capital gains. (lawfilesext.leg.wa.gov) (stokeslaw.com) The state already has a separate capital gains tax, and that is where one hidden limit is already on the books. The Washington Department of Revenue says only individuals owing that tax file a capital gains return, and they must attach a copy of the federal return for the same year. (dor.wa.gov) Washington’s charitable deduction under the capital gains tax is narrower than the federal one. Revised Code of Washington 82.87.080 says the deduction applies only to donations to a “qualified organization,” and that organization must be a 501(c)(3) nonprofit “principally directed and managed within Washington.” (app.leg.wa.gov) That means a donation that works for federal tax purposes may not work for Washington capital gains purposes. Joe Wallin wrote on April 14 that donor-advised funds run by national sponsors are the biggest trap, because the relevant entity is the sponsor, not the charity that later receives the grant. (thestartuplawblog.com) The capital gains deduction also has hard dollar limits. Revised Code of Washington 82.87.080 sets a $250,000 minimum qualifying charitable donation amount and caps the deduction at $100,000 for the taxable year, with no carryforward or carryback. (app.leg.wa.gov) Washington’s Department of Revenue says the 2025 capital gains return and payment deadline was extended to May 1, 2026, for residents affected by severe storms and flooding that began December 9, 2025. That gives taxpayers one live filing season to test how Washington’s existing tax rules line up with federal returns before the broader income tax arrives in 2028. (dor.wa.gov)
