Washington's millionaires tax is law. Here's how to plan for it.
SB 6346 creates a 9.9% tax on personal income above $1 million beginning January 1, 2028. Many planning strategies take 12–24 months to put in place, so the planning window is 2026–2027.
What is SB 6346?
Senate Bill 6346, signed March 12, 2026, creates Washington's first personal income tax in nearly 100 years. The bill passed the House 51–46 after a 24-hour debate and the Senate 27–22. Governor Ferguson called it "historic progress in rebalancing our unfair system."
| Provision | Details |
|---|---|
| Tax rate | 9.9% on all personal income above $1 million |
| Who pays | Individuals and married/domestic partner households with combined income over $1 million |
| Income covered | Wages, salaries, business pass-through income, investment income, capital gains |
| How it works | Only income above the $1M threshold is taxed — a $1.5M earner pays 9.9% on $500,000 only |
| Effective date | January 1, 2028 |
| First collections | 2029 (on calendar year 2028 earnings) |
| Estimated filers | Approximately 21,000 Washington households — less than 0.5% of taxpayers |
| Planning window | 2026–2027 — strategies must be in place before January 1, 2028 |
Opponents argue the tax may violate Washington's constitutional requirement for uniform taxation, and legal challenges are expected. Planning should still proceed on the assumption that the tax takes effect as written: most strategies take 12–24 months to implement, and waiting for legal clarity may mean missing the window.
What the tax means in real dollars
The impact varies significantly by income level:
| Annual household income | Income over $1M threshold | New annual WA state tax |
|---|---|---|
| $1,250,000 | $250,000 | $24,750 |
| $1,500,000 | $500,000 | $49,500 |
| $2,000,000 | $1,000,000 | $99,000 |
| $3,000,000 | $2,000,000 | $198,000 |
| $5,000,000 | $4,000,000 | $396,000 |
| $10,000,000 | $9,000,000 | $891,000 |
If you own an S-corporation or LLC with pass-through income, your share of business profits counts toward household income. A business generating $2 million in pass-through income to a single owner creates $99,000 in new annual state tax, every year beginning in 2029. Planning now can materially reduce that obligation.
The combined tax burden on high earners
SB 6346 adds to several revenue measures enacted in recent years. Together, they can create a combined effective rate above 50% for top earners:
| Tax | Rate / details |
|---|---|
| Federal income tax (top bracket) | 37% on income over ~$609K (single) / ~$731K (married) |
| Federal net investment income tax | 3.8% on investment income for high earners |
| WA capital gains tax | 9.9% on capital gains over $1 million (enacted 2025) |
| WA millionaires tax — new | 9.9% on all income over $1 million (effective 2028) |
| WA B&O tax (business owners) | Varies by classification, up to ~1.8% on gross receipts |
| Combined effective rate (est.) | Potentially 50%+ on income above $1 million |
For Washington business owners and investors, tax strategy is now a core part of financial planning. Strategies that worked in a state with no income tax need to be revisited.
Five life insurance strategies to review
Life insurance can help high earners legally reduce taxable income. The right structure can defer growth, shield assets from income tax and provide protection at the same time. These are the five strategies we review most often with clients affected by SB 6346.
Indexed universal life (IUL)
Builds cash value linked to a market index such as the S&P 500, with downside protection through a guaranteed floor. Best for business owners and executives redirecting income into a tax-advantaged accumulation vehicle and a tax-free retirement income stream.
- Tax-deferred cash value growth
- Policy loans and withdrawals structured as income-tax-free
- Death benefit passes to beneficiaries income-tax-free
- No capital gains tax on internal growth
Private placement life insurance (PPLI)
A variable universal life product for accredited investors that places institutional-quality investment strategies inside a life insurance tax wrapper. Best for high-net-worth individuals with significant portfolios seeking to reduce annual taxable investment income, including capital gains.
- Tax-deferred growth shields investment income from the 9.9% tax
- Access to hedge funds, private equity and alternatives inside the policy
- Income-tax-free distributions via policy loans in retirement
- Death benefit passes outside probate, income-tax-free
Business-owned life insurance (BOLI)
Helps move compensation and benefits outside personal taxable income. Best for S-corp and LLC owners with pass-through income above $1 million restructuring compensation before the 2028 effective date.
- Executive bonus plans (Section 162): deductible to the business, tax-advantaged for the owner
- Split-dollar arrangements: premiums and death benefit shared, deferring personal income recognition
- Non-qualified deferred compensation: defer income beyond 2027, informally funded with BOLI
Irrevocable life insurance trust (ILIT)
Holds a policy outside your taxable estate so the death benefit passes to heirs free of income and estate taxes, and removes policy cash value from the taxable income picture. Best for multi-generational wealth transfer.
- Policy cash value removed from your taxable income picture
- Death benefit passes income- and estate-tax-free
- Potential creditor protection for policy assets
- Coordinates with GRATs, CRTs, family LLCs and other estate vehicles
Charitable planning with life insurance
Charitable giving can reduce taxable income each year while building a legacy, and life insurance structures amplify the effect. Best for philanthropically minded high earners seeking annual deductions.
- Charitable remainder trust: donate appreciated assets, receive income, and replace value for heirs with life insurance
- Charitable life insurance policy: gift a premium-paid policy for an annual deduction
Strategy at a glance
| Strategy | Best for |
|---|---|
| IUL | Tax-free accumulation and retirement income |
| PPLI | Shielding investment income; accredited investors |
| BOLI | Business owner compensation restructuring |
| ILIT | Estate planning and wealth transfer |
| CRT | Charitable deductions that reduce taxable income |
Why 2026 is the year to act
Many of these strategies need 12–24 months of lead time: policies must be underwritten and funded, trusts formed, and compensation changes timed to IRS rules. Court proceedings typically take years, and these strategies offer benefits regardless of the tax outcome — tax-deferred growth, estate planning and retirement income.
Coordinated planning
Broad market access
More than 50 A-rated carriers, covering all five strategy types.
Advisor coordination
We work closely with your CPA, estate attorney and financial advisors so every strategy fits your overall plan.
Guard Legacy partnership
We partner with Guard Legacy, a financial advisory firm co-founded by Michael Oskouian, focused on wealth protection and succession planning for business owners aged 50–72.
Washington experience
Serving Washington business owners and high-net-worth clients since 1992. Michael Oskouian holds MBA, ARM, CRM, CIC and LUTCF designations.
Request your tax exposure review
No cost and no obligation. We'll assess your SB 6346 exposure and walk you through the strategies suited to your income level and business structure. An advisor will contact you within one business day.
Prefer to talk? Call (425) 242-5357, or visit us at 4055 Lake Washington Blvd NE, Suite 100, Kirkland, WA 98033.
This advisory is provided for general informational purposes only and does not constitute legal, tax, investment or financial advice. All life insurance and tax mitigation strategies should be reviewed with a licensed attorney, CPA and financial advisor in the context of your individual circumstances. SB 6346 is subject to potential legal challenge; implementation timelines may vary. First Underwriters Insurance Brokers is a licensed insurance brokerage. Past results do not guarantee future outcomes.