Washington's Tax Cliff (and What It Means for Idaho)
A landmark 2028 income tax on high earners is reshaping the wealth landscape of the Pacific Northwest.
Washington State has long been a haven for high-income professionals and entrepreneurs, offering no state income tax on wages, and only recently adding a state level capital gains tax on certain transactions. That era continues to fade. Beginning January 1, 2028, Washington's SB 6346 (Title 82A) will impose a 9.9% tax on all "Washington taxable income" exceeding $1 million per year. We anticipate this tax driving significant relocation out of the state. As the neighboring state, Idaho will likely absorb a portion of this migration. For many, Boise is emerging as a compelling alternative.
The Mechanics of Washington's New Tax
The tax applies to every dollar above $1 million. Unlike the federal standard deduction, Washington's $1 million deduction is not doubled for married couples. A household earning $1.2 million faces a taxable base of $200,000, not zero, generating a $19,800 annual Washington state tax bill where none existed before.
With this “Marriage Penalty,” a $3 million household income would send $198,000 per year back to Washington State, a combined effective rate well over 40% (inclusive of federal taxes).
The 2026–2027 Window
The years between now and the 2028 effective date represent a critical planning window. Strategies like income acceleration (harvesting capital gains or structuring business sales before 2028), pass-through entity elections, and most consequentially domicile changes must be strategized and executed before the law takes effect. Waiting until next year leaves little margin for error.
It is also worth noting that business owners with qualifying small business stock (QSBS) may be eligible for significant federal exclusions. Proposed legislative changes in Washington could decouple that benefit at the state level, much more closely mirroring states like California. While this is a separate issue entirely, as it falls under the existing state capital gains tax, it is reminiscent of the broader legislative zeitgeist.
Idaho as a Destination
Idaho uses two pathways to establish residency. Idaho treats you as a full-year resident if you are domiciled in Idaho for the entire tax year or if you maintain a home in the state and spend more than 270 days (approximately 9 months) there during the year. A genuine domicile change requires a total, documented break from your prior state. We have a comprehensive review process to ensure a clean and well-documented change of domicile.
Washington, for its part, will scrutinize claimed domicile changes carefully. A genuine relocation requires establishing Idaho as the center of your life, not simply purchasing property here while maintaining your primary professional and social ties in Seattle or Bellevue.
What This Means for the Treasure Valley
Boise and the broader Treasure Valley are already experiencing elevated interest from high-net-worth Pacific Northwest families. The region offers a lower cost of living, lower top-end income tax exposure, and proximity to the outdoor amenities (and sun). For clients who have been considering a lifestyle transition to the inland Northwest or who have existing ties to Idaho through vacation property or family, the 2028 threshold may be the catalyst that makes a formal domicile change the right financial decision.
Our team is well-positioned to help you model the tax impact of a domicile change against your specific income profile, evaluate the residency documentation requirements, and coordinate with legal counsel on the domicile transition process. The earlier this planning begins, the more options remain available.
Disclosure:
The information presented in this article is intended for general educational purposes and should not be interpreted as individualized financial, investment, tax, or legal advice. Any hypothetical examples, scenarios, or illustrative anecdotes are used strictly to demonstrate financial planning concepts and do not reflect all client results. Because each person’s financial situation is unique, the strategies or ideas discussed may not be appropriate for your circumstances. As an investment adviser representative of a registered investment adviser, we act in a fiduciary capacity and provide advice tailored to each client’s objectives only after adequate understanding of the client’s situation. Before making any financial decisions, please consult with your adviser or another qualified professional.
Neither Hoeven Wealth nor XY Investment Solutions provide tax or legal advice. The tax and estate planning information offered is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.
