Big Private Company Gain in Washington? Your 2028 Planning Window Is Closing

Key Takeaways

• Washington's 9.9% income tax on >$1M starts Jan 1 2028
• Capital gains tax already 9.9% for gains above $1M since 2025
• Nine‑figure stock holders generate $6‑9 M investment income, taxed $600K‑$900K
• Domicile change requires no WA abode, outside home, ≤30 days yearly
• GRAT and IDGT trusts need 12‑24 months setup before liquidity

Pulse Analysis

Washington’s tax landscape is shifting dramatically for high‑earning tech employees and investors. While the state’s 9.9% capital‑gains excise tax has been in place since 2025, the 2028 enactment of ESSB 6346 adds a 9.9% levy on all taxable income above $1 million, covering wages, RSU vesting, partnership distributions and, crucially, the investment income generated after a liquidity event. For a typical $200 million exit that leaves $150 million invested at a 4‑6% yield, the new rule translates into $600,000‑$900,000 of state tax each year—a perpetual bite that dwarfs the one‑time capital‑gains cost.

Because the income‑tax component is new, the planning window is narrow. To avoid the ongoing drag, individuals must satisfy Washington’s three‑prong domicile safe‑harbor—no permanent residence in the state, a bona‑fide home elsewhere, and 30 days or fewer spent in Washington—for the entire 2028 tax year. This requires establishing an out‑of‑state abode well before Jan 1 2028, typically by mid‑2027, and maintaining meticulous documentation. Simultaneously, pre‑liquidity trust strategies such as Grantor Retained Annuity Trusts (GRATs) or Intentionally Defective Grantor Trusts (IDGTs) need 12‑24 months to value, fund, and administer, making early engagement with tax counsel essential.

Beyond domicile and trusts, charitable structures like Charitable Remainder Trusts or Donor‑Advised Funds can spread tax liability while fulfilling philanthropic goals, and integrating these moves with estate planning preserves federal exemption space. For those with deep Washington roots, paying the 9.9% may be acceptable, but for nine‑figure stakeholders the cumulative tax exposure justifies the friction of relocation or sophisticated trust work. Acting now ensures the most valuable tools remain available and protects wealth from a permanent state‑level tax drain.