How to Make Estimated Tax Payments Under Washington's New Income Tax

Key Takeaways

• Estimated payments required starting 2028 for high earners
• Payments likely follow federal quarterly schedule and safe harbor rules
• Entity-level election shifts payment responsibility to the entity
• Withholding uncertain; taxpayers should plan for quarterly payments
• Penalties accrue as interest on underpaid amounts

Pulse Analysis

Washington’s inaugural income tax marks a watershed for the state’s fiscal landscape, introducing a 9.9% rate on income that exceeds the $1 million threshold. While the tax will not take effect until 2028, the statutory language already outlines an estimated‑payment framework that mirrors the federal system, suggesting quarterly due dates of April 15, June 15, September 15 and January 15. This alignment signals that high‑earning residents and businesses will need to incorporate new cash‑flow considerations into their financial planning well before the first filing deadline.

The mechanics of the estimated payments are still pending DOR rulemaking, but key elements are predictable. Safe‑harbor provisions are expected to allow taxpayers to avoid penalties by paying either a percentage of the prior year’s liability—or, for the inaugural year, a projected portion of the current year’s tax. An optional entity‑level election under Section 502 lets pass‑through entities remit tax at the entity level, granting owners a credit and potentially unlocking a full SALT deduction. Meanwhile, the question of wage withholding remains open; if Washington adopts employer withholding, the compliance burden could shift, but taxpayers should still anticipate quarterly payments on non‑wage income.

Practically, high‑income individuals and entities should begin modeling 2028 tax exposure now. Projected AGI above $1 million multiplied by 9.9% yields an approximate liability, which can be divided into quarterly reserves of roughly 2.5% of excess income. Aligning these reserves with existing federal estimated‑payment schedules simplifies cash management. Monitoring DOR announcements—likely by mid‑2027—will be crucial to fine‑tune payment amounts and deadlines. Engaging a tax advisor early can ensure that reserves are adequate, penalties are avoided, and the transition to Washington’s new tax regime is seamless.