Washington's startup ecosystem is facing significant tax challenges that could deter new business creation. The state has implemented a 9.9% capital gains tax on long-term gains exceeding $1 million, scheduled to take effect on January 1, 2025.
Simultaneously, proposed bills like SB 6229 and HB 2292 threaten to eliminate the federal exclusion for qualified small business stock, which currently allows founders to exclude up to $10 million in capital gains if held for five years. This change would lead to state taxes ranging from 7% to 9.9% on gains that the federal government intended to exempt.
Additionally, legislation including HB 2724 and SB 6346 is progressing through the state legislature, aiming to implement a 9.9% income tax on adjusted gross income exceeding $1 million, with initial payments required by 2029.
Washington's estate tax threshold stands at $3 million, significantly lower than the federal level of $13.6 million, posing further financial burdens on startup founders and their families.