Moving from BC to Washington State: Taxes in a No-Income-Tax State That Still Taxes Capital Gains

Washington has no state income tax, but since 2022 it has taxed long-term capital gains above $262,000 at 7%. If you’re moving from BC to Seattle, Bellevue, or Redmond for a tech job, that matters more than the “no income tax” headline suggests, because RSU sales, stock option exercises, and investment liquidations can clear the threshold in a single transaction. The federal cross-border obligations (departure tax, RRSP/TFSA decisions, FBAR, treaty elections) are the same as any province-to-state move, and other guides already cover those. This page covers what changes because the destination is Washington.

What taxes does Washington actually charge?

No state income tax on wages, salary, pension, rental income, interest, dividends, or business income. Washington instead relies on sales tax, property tax, and the business and occupation (B&O) tax. The capital gains tax is the recent addition.

Tax	Rate	What it hits
Capital gains excise tax	7% on long-term gains above $262,000 (2024 threshold, indexed)	Sales of stocks, bonds, and other capital assets. Excludes real estate, retirement accounts, livestock, timber, and certain small-business interests
Sales and use tax	6.5% state plus local additions (total often 10%+)	Retail purchases, which is a shift from BC’s 7% PST (or 12% HST on some goods)
Property tax	No cap, assessed annually, varies by county	King County (Seattle) effective rates run roughly 0.9% to 1.1% of assessed value
B&O tax	Varies by classification (0.138% to 3.3%)	Gross receipts of businesses operating in WA, with no deduction for costs. Relevant if you’re self-employed or running a business
Estate tax	Graduated from 10% to 20% on estates above $2.193 million	Lower threshold than the federal $13.61 million exemption, which catches more estates

How does the capital gains tax work?

Washington’s capital gains tax is an excise tax, not an income tax (the state Supreme Court upheld it on that basis in March 2023). It applies to long-term capital gains (assets held more than one year) above the annual threshold. Short-term gains are not subject to it.

Key exclusions:

• Real property (real estate sales are excluded entirely)
• Gains from retirement accounts (IRA, 401(k), pension distributions)
• Gains on the sale of a principal residence (which is already excluded for federal purposes under IRC 121)
• Sales of livestock, timber, and commercial fishing privileges
• Gains from the sale of certain family-owned small businesses (a deduction up to $100,000 applies)

The practical effect for a tech worker arriving from BC: your W-2 salary at Amazon, Microsoft, or any other employer is untaxed by the state. But when you sell RSU shares, if the gain in a single year exceeds the threshold, 7% applies to the excess. The same is true for liquidating a Canadian brokerage account or selling a concentrated stock position.

What happens on the BC side when I leave?

The same departure tax as leaving any other province. Canada deems you to have sold your worldwide assets (with exceptions for Canadian real property, pensions, and certain other properties) at fair market value on the day you leave. BC’s provincial tax rates apply on top of the federal tax.

BC’s provincial income tax rates for 2025:

• 5.06% on the first $47,937
• 7.7% on $47,937 to $95,875
• 10.5% on $95,875 to $110,076
• 12.29% on $110,076 to $133,664
• 14.7% on $133,664 to $181,232
• 16.8% on $181,232 to $252,752
• 20.5% on amounts over $252,752

If you hold significant unrealized gains in a non-registered brokerage account, the departure tax bill can be large. The capital gains inclusion rate is 50% on the first $250,000 of gains and 66.67% on gains above that. Deferring the departure tax is possible in limited cases, and treaty elections can adjust the US cost basis to avoid double tax on the same gain.

How does the RRSP/TFSA play out in a no-income-tax state?

This is where Washington actually simplifies things. Because there’s no state income tax, there’s no state-level question about whether the RRSP treaty deferral applies (unlike California, which ignores the treaty and taxes RRSP growth annually). When you eventually withdraw from the RRSP as a Washington resident, you’ll owe federal tax (ordinary income rates) and Part XIII withholding to Canada (15% on periodic payments under the treaty, 25% on lump sums), but nothing to the state.

The TFSA is federally taxable in the US and should generally be collapsed before leaving Canada to avoid ongoing Form 3520/3520-A reporting. Since Washington has no income tax, the federal treatment is the only layer, and the TFSA gain recognized on the US return isn’t doubled by a state return.

For MSP (BC’s Medical Services Plan), coverage continues until the end of the month after you leave BC, plus any additional period if you’ve prepaid premiums. You’ll need employer-sponsored health insurance or a marketplace plan in Washington. The provincial health insurance timing guide covers the mechanics.

What about the B&O tax if I’m self-employed?

If you’re running a business in Washington (not just earning a W-2), the business and occupation tax applies to gross receipts, with no deduction for costs of goods sold or operating expenses. The rate depends on the business classification: retailing at 0.471%, service and other activities at 1.5%, manufacturing at 0.484%. A software consultant earning $300,000 in gross receipts would owe about $4,500 in B&O tax, on top of federal self-employment tax and income tax.

This is different from BC’s system, where business income is taxed as personal income (or through a CCPC at the small business rate of about 11% combined federal/provincial on the first $500,000). The B&O tax is simpler to compute but has no deductions, so high-margin businesses pay less than they would under an income tax, and low-margin businesses pay more.

If you’re keeping a Canadian corporation while living in Washington, the US federal reporting (Form 5471, GILTI, Subpart F) all applies, and the B&O tax question depends on whether the Canadian corporation has nexus in Washington (selling to Washington customers, having an employee there).

What about Washington’s estate tax?

Washington’s estate tax applies to estates above $2.193 million (2024, indexed), with rates from 10% to 20%. This is far below the federal exemption of $13.61 million and catches many more estates. A Canadian who becomes a Washington domiciliary with a combined US/Canadian estate above the threshold needs to plan for three potential layers: Canadian deemed disposition at death, US federal estate tax (relevant above the federal exemption or for non-citizens at the lower $60,000 threshold), and Washington state estate tax. The cross-border estate planning guide covers the will structure, and the Form 706-NA guide covers the federal filing.

What should I do next?

The BC side follows the standard departure checklist. On the Washington side, the main planning items are the capital gains tax threshold (time large sales to stay under it or spread them across years), the B&O tax if self-employed, the estate tax threshold, and health insurance enrollment.

• Departure tax checklist, the full Canadian exit sequence
• What happens to your RRSP and TFSA on a US move, federal treatment and reporting
• BC to California taxes, the comparison corridor where California does tax the RRSP annually
• Alberta to Texas taxes, the other no-income-tax corridor
• Cost basis and the treaty election, avoiding double tax on the same gain
• State income tax for cross-border filers, the general state-by-state overview
• Moving from Canada to Oregon, the neighboring state with high income tax but no sales tax
• Moving from Canada to Alaska, the no-income-tax, no-sales-tax state up the Pacific coast

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.