The Complete Guide To Washington State Income Tax & Payroll Taxes

Washington does not have state or local income tax withholding, which makes payroll simpler than in many states. However, Washington employers still need to handle federal payroll taxes, state unemployment insurance, Paid Family & Medical Leave, WA Cares, workers’ compensation, new-hire reporting, and payroll recordkeeping.

This guide breaks down the Washington payroll taxes and labor laws small business owners need to know.

Does Washington Have A State Income Tax?

Washington does not have an individual or corporate income tax, so employers do not withhold Washington state income tax from employee wages.

However, Washington businesses may still owe other state business taxes, such as business and occupation tax, public utility tax, retail sales tax, or use tax, depending on their business activities. These taxes are separate from payroll taxes. The Washington Department of Revenue says the B&O tax is a gross receipts tax based on business income, not business profit.

Federal & State Payroll Taxes In Washington

Washington does not have state or local income tax withholding, but employers still need to handle federal payroll taxes and several Washington-specific payroll obligations, including unemployment insurance, Paid Family & Medical Leave, WA Cares, and workers’ compensation premiums.

Washington businesses may also be responsible for other business taxes, such as B&O tax, public utility tax, sales tax, or use tax, but those are separate from payroll taxes.

Washington Payroll Tax Exclusions & Exemptions

Washington does not have state income tax, so employers do not need to manage Washington income tax withholding exemptions.

However, some workers, wages, or employers may have special treatment for Washington payroll-related programs, including unemployment insurance, Paid Family & Medical Leave, WA Cares, and workers’ compensation. For example, employees with an approved WA Cares exemption do not have WA Cares premiums withheld from their wages.

Independent contractors are also treated differently from employees. Businesses generally do not withhold payroll taxes or Washington payroll-related premiums for properly classified independent contractors, but contractors are responsible for their own tax obligations.

Washington businesses may qualify for other state tax incentives, credits, or exemptions, but those usually apply to business taxes such as B&O tax, not payroll taxes. Use the Washington Department of Revenue’s tax incentive resources for non-payroll business tax programs.

Washington Labor Laws & Other HR Requirements

In addition to payroll taxes, Washington employers need to follow state and federal labor laws covering minimum wage, payday rules, paid sick leave, Paid Family & Medical Leave, workers’ compensation, new-hire reporting, child labor, jury duty, discrimination protections, and meal and rest breaks.

How To Calculate Payroll Taxes In Washington

Once you understand Washington payroll taxes and labor rules, running payroll comes down to calculating gross pay, withholding federal taxes and Washington employee premiums, paying employer taxes, processing payroll, filing reports, and keeping records.

Step 1: Gather Employee Payroll Documents

Before running payroll, collect the documents and information needed to pay employees correctly, including:

• Form W-4 for federal income tax withholding
• Form I-9 to verify employment eligibility
• Direct deposit information, if applicable
• Employee pay rate, pay schedule, classification, and deduction information

Washington does not have state income tax withholding, so there is no state income tax withholding form.

Step 2: Calculate Gross Pay

Calculate each employee’s gross pay based on their pay type. For salaried employees, divide the annual salary by the number of pay periods. For hourly employees, multiply hours worked by the hourly rate and include overtime when required.

Add any taxable supplemental earnings, such as tips, commissions, bonuses, PTO, reimbursements, or other compensation.

Step 3: Calculate Taxes & Premiums

Washington employers must withhold federal income tax based on each employee’s Form W-4. Employers and employees also pay FICA taxes. For 2026, Social Security tax is 6.2% for both employer and employee up to the $184,500 wage base. Medicare tax is 1.45% for both employer and employee, with no wage cap. Employers must also withhold the 0.9% Additional Medicare Tax from employee wages over $200,000.

Washington unemployment insurance is paid by employers. For 2026, Washington’s unemployment taxable wage base is $78,200 per employee, and rates vary by employer.

Washington employers may also need to withhold employee-paid premiums for Paid Family & Medical Leave and WA Cares. For 2026, the Paid Leave premium rate is 1.13% of gross wages up to the 2026 Social Security wage cap; employees pay 71.43% of the premium, and employers with 50 or more employees pay 28.57%. WA Cares premiums are 0.58% of employee gross wages, paid by employees, with no Social Security wage cap.

Step 4: Subtract Deductions

After calculating taxes and premiums, subtract any required or employee-authorized deductions, such as benefit contributions, retirement contributions, wage garnishments, child support, union dues, or other approved deductions.

Step 5: Pay Employees & File Payroll Reports

After calculating gross pay, taxes, deductions, and net pay, pay employees using an allowed payment method, such as direct deposit, paper check, or another approved method.

Washington employers must also file and pay applicable payroll reports and premiums, including unemployment insurance, Paid Family & Medical Leave, WA Cares, workers’ compensation premiums, and federal payroll tax filings.

Step 6: Keep Payroll Records

Keep payroll records organized and secure. Records should include employee names, Social Security numbers, addresses, pay rates, hours worked, pay periods, payment dates, deductions, and tax records.

The IRS generally requires employment tax records to be kept for at least four years. FLSA payroll records should generally be kept for at least three years, while wage calculation records, such as timecards and work schedules, should generally be kept for at least two years.

Washington Payroll & Other State Resources

For official guidance, use the Washington Employment Security Department for unemployment insurance, the Washington Paid Family & Medical Leave program for PFML premiums, WA Cares for long-term care premium rules, and the Washington Department of Labor & Industries for workers’ compensation, minimum wage, paid sick leave, meal and rest breaks, and youth employment rules.

For federal payroll rules, use the IRS for federal withholding, FICA, FUTA, and employer tax filing guidance, and the U.S. Department of Labor for FLSA wage, overtime, and recordkeeping requirements.

Also consider using payroll software to simplify the process, help reduce errors, and automate tedious tasks.