Washington's New Millionaires' Tax, and the Real Cost of Staying Put
- Jun 22
- 5 min read
Short answer: Starting in 2028, Washington will tax household income over $1 million at 9.9%, its first broad tax on high earners in a state that built its whole appeal on not having one. But for a high earner, the cost of staying is not just that annual bill. It is the opportunity cost. Every dollar you hand to the state is a dollar you cannot redeploy into something that grows.
Move that capital to a no-income-tax state like Texas, put it into an Austin home that has historically appreciated around 5% a year, and the gap between staying and moving compounds into real money over a decade. Here is the math. (This is general information, not tax or investment advice. Please run your own numbers with a CPA and a financial advisor.)
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First, what actually changed in Washington
For years, the Seattle pitch was simple: no state income tax. That is what made Washington the tax-friendly alternative to California. That story is changing fast, and unlike a lot of California's proposals, these changes are real and enacted.
- A capital-gains tax took effect in 2025: 7% on long-term gains above roughly a $278,000 annual deduction, and 9.9% on the portion above $1 million.
- A millionaires' income tax was signed in 2026: 9.9% on household income over $1 million, effective 2028.
- Washington also has an estate tax with one of the lowest exemptions and highest top rates in the country.
So a state that built its brand on having no income tax is now assembling its own stack of high-earner taxes. Texas levies none of them. That is the simple version. But the simple version still misses the bigger number.
The mistake: stopping at the tax bill Here is where most people stop thinking, and where they leave money on the table. They look at, say, the capital-gains tax on a $5 million exit, roughly $391,000, and think "nice to avoid that." True. But the tax avoided is the wrong number to anchor on, because it ignores what that money could be doing.
I spent years as a statistical arbitrage trader before real estate, and the first thing trading teaches you is that idle capital has a cost. A dollar paid in tax is not just gone, it is a dollar that never got the chance to compound. So the real question is not "how much do I avoid?" It is "what does that capital become if I put it to work?"
Deploy the capital, and let it grow
Texas has no income tax and no capital-gains tax, so the money you stop sending to Olympia is yours to deploy. One of the most direct places to put it is into the home you are buying anyway.
Austin home values have risen roughly 5% per year over the past couple of decades on a compound basis. Two honest caveats, because I am not going to hand you a number that does not hold up. That long-run average includes a wild pandemic boom and the correction that followed, and nobody can promise the next decade looks like the last. Real estate does not move in a straight line. But 5% is a reasonable, conservative long-term assumption, well below the double-digit pandemic years and in line with the multi-decade trend.
Now put the two ideas together. A Washington founder who avoids that one-time capital-gains hit and redeploys it into an appreciating Austin asset is not just saving a tax. They are converting a payment to the state into capital that grows. That is the move.
The honest counterweight: Texas property taxes
I net this out every time. Texas property taxes are higher than Washington's, roughly 1.8% effective in the Austin area versus about 0.84% in Washington. On a large home that is real money each year. For high earners the capital-gains and income-tax savings still win by a wide margin, but you should see the property tax in the math, not trip over it later. I would rather hand you a smaller, honest number than a bigger one that falls apart.
The full picture of "staying" So the true cost of staying in Washington, for a high earner, is really three things stacked together. The annual income tax you will start paying in 2028. The capital-gains and estate exposure you carry now. And the compounding you forgo on all of it, what that money would have become if it had been invested or deployed instead of taxed.
The house in Austin is the lifestyle decision. The residency change is the financial one. And when you account for opportunity cost, the gap is a lot wider than the tax table alone suggests.
Frequently asked questions
Does a Washington resident save income tax by moving to Austin today?
On recurring income, not yet, because Washington's income tax does not take effect until 2028 and Texas has none either. What you save right now is the capital-gains tax (7%, or 9.9% over $1 million) on a stock, equity, or business sale, plus Washington's estate tax. Starting in 2028, the 9.9% income tax over $1 million becomes a recurring saving too.
How much is Washington's capital-gains tax on a big exit?
Roughly $391,000 on a $5 million gain (7% on the first $1 million, 9.9% above it, after the standard deduction). Texas does not tax capital gains at all, so for a founder with an exit, the timing of a Texas move around that sale matters a great deal.
What appreciation rate is realistic for Austin?
Austin's long-run compound appreciation has been roughly 5% per year. The past decade ran hotter because of the 2020 to 2022 boom, and the market then corrected through 2025, so 5% is a deliberately conservative assumption, not a guarantee. Use your own number with an advisor.
Isn't this just a real estate pitch?
The opportunity-cost framing is real no matter where you deploy the money, stocks, a business, or a home. The point is simply that taxed dollars cannot compound, and a no-income-tax state lets that capital go to work. Where you put it is your call.
We are delighted to be your guides to Austin and Austin real estate, and always happy to nerd out on the numbers with you. Contact us for a personalized, complimentary analysis.
Cheers,
Jen and the team
Check out our full guide for relocating here.
*This article is general information, not tax, legal, or investment advice. Tax outcomes and investment returns depend on your situation and are not guaranteed; consult a qualified CPA and financial advisor. Jen Berbas is the team lead of the Berbas Group in Austin, Texas, and a contributor at Inman. A former statistical arbitrage trader, she brings an investment-minded, data-driven approach to relocation and luxury real estate. [berbasgroup.com](https://www.berbasgroup.com/)*
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