What Washington state agents are seeing with new ‘millionaires tax’

Washington state is entering a new policy era with its “millionaires tax” — targeting high-income earners who shape the luxury real estate market.

The law imposes a 9.9% tax on annual income above $1 million, with implementation expected in 2028 pending legal challenges.

For real estate professionals, the policy could spell shifts in client behavior, transaction timing and investment strategy.

While it affects only a small percentage of households — roughly half a percent of the population — these clients often dominate luxury and investment property activity.

Jacob Weaver, managing broker at Bellevue, Washington-based Jacob Weaver Group, brokered by eXp Luxury Realty, said reactions among high-net-worth clients have varied widely.

He’s observed two main groups; those actively planning around the tax and those who accept it as part of broader societal considerations.

“One group is seeing what’s happening around the world and in our country, and they’re saying, ‘You know, there is a huge discrepancy in the ultra-high-net-worth individuals and middle class,” Weaver told HousingWire. “And their general take is,’ Yes, I’m going to have to pay some more taxes.

“Do I love it? Not really. Is it maybe the best thing for our state and society. Probably.’”

How the tax works

The tax applies only to income above $1 million, leaving most households unaffected.

Weaver emphasized that many high-net-worth individuals earn income through sophisticated strategies such as business structures, investments or real estate rather than straightforward salaries.

“They’re very creative and they’ve got great advisors,” he said. “Everybody knows that. We’re always in a changing ecosystem of taxes, opportunity, micro and macroeconomics, localized opportunity in certain markets.”

The final number of people truly affected by the tax will likely be smaller than what many expect, Weaver added.

Even so, he explained, early signs of change were already emerging in client behavior.

“We’re seeing people who maybe had a timeline of moving out of state in the next five to 10 years accelerating a little bit,” Weaver said. “It’s people who maybe were planning on that anyway, that was part of the retirement plan — or it’s where they wanted to eventually end up after they sold the company.

“I would say that timeline is getting compressed a little bit. Somebody who is going to be leaving in five, six or seven years, maybe now it’s worth doing it in three.”

Overlap with capital gains taxes

Washington has already imposed a capital gains tax — with long-term gains above certain thresholds taxed at 7% and a 2.9% surtax on gains exceeding $1 million in a calendar year.

Yet primary residence transactions remained largely exempt, an important distinction for agents to relay to clients wary of the millionaires tax, said Heidi Braund, designated broker at Seattle-based Corcoran Lifestyle Properties.

“The tax implications aren’t aren’t going to hit when they sell their homes,” she said. “So, that part is safe. The Seattle King County Realtors and the Washington state Realtors have lobbied that pretty hard. So, they saved the millionaires from when they sell houses to not have to pay taxes on their net proceeds.”

Aaron Abrahamson, an agent at Seattle’s Coldwell Banker Danforth, highlighted general frustration among clients with the new millionaires tax and general taxation environment.

“Washington is taxing everybody out of it,” he said. “You know, they’re taxing us out of a comfortable living and people are tired of it.”

Potential luxury housing impact

Weaver said some clients are exploring new opportunities, particularly in second homes and investment properties.

Many of his high-net-worth buyers are looking for markets with better tax environments — such as Nevada, Palm Springs, Florida, and the Phoenix area.

“We’re seeing that in Nevada there’s a lot of great luxury product that’s being built, both condos as well as single-family homes,” Weaver said. “You’ve got just some monster mansions in Henderson and you also have the Four Seasons development (in Las Vegas).

“Those types of projects are facilitating these secondary home plays for people from California and now more so from Washington, who have high tax rates and a desire to get into a better tax environment.”

Abrahamson also noted that some ultra-wealthy clients had already left the state.

“A couple of friends I have, very, very wealthy individuals,” he said. “They have both gone outside of the state and purchased and are building new properties, new homes for themselves. These are homes that they wouldn’t be able to build here because of all the taxes and permits anymore. So, they’re done. They left.”

Braund envisioned future impact from the millionaires tax but said, for now, business has remained relatively stable.

“We’re still seeing multiple offers over here in the ($1 million to $2 million) range,” she said. “I can imagine, at some point, maybe the houses in that upper range may come down in price and bring some lower-end buyers up to that range. I can see maybe a laddering effect, but I don’t see that yet.”

While Washington’s wealth tax could influence high-end real estate, market fundamentals remain strong and guidance from agents is helping clients navigate an evolving status quo.