Construction & Trades in Washington: taxes and retirement for 2026
For construction workers, electricians, plumbers, HVAC techs, painters and handymen in Washington. Washington has no state income tax on wages or self-employment income. Here are the 2026 rules, a worked example and the official sources.
Washington rules for construction & trades
- State income tax (2026)
- Washington has no state income tax on wages or self-employment income. Washington has no individual income tax in 2026. Senate Bill 6346 (2026 session) adds a 9.9% tax for individuals and married couples filing jointly with adjusted gross income over $1 million, starting January 1, 2028, with first returns due in April 2029. A separate capital gains tax already applies: 7% on long-term gains above the standard deduction ($278,000 for 2025), plus 2.9% more (9.9% total) on gains over $1 million from tax year 2025.
- Washington business and occupation (B&O) tax
- A gross receipts tax on almost every business, including sole proprietors. The service rate in 2026 is 1.5% if the prior year's service income was under $1 million (1.75% from $1 million to $4,999,999.99, and 2.1% at $5 million or more). A small business credit of up to $160 a month for mainly service businesses ($55 a month for others) reduces or wipes out the tax. The Department of Revenue can excuse businesses under $125,000 a year in B&O gross income that owe no other DOR taxes from filing returns; SB 6346 raises this filing threshold to $250,000 for businesses that do not collect retail sales tax or public utility tax.
- Rideshare (TNC) driver minimum pay and rights (RCW 49.46.300 to 49.46.350)
- Rideshare drivers get state minimum pay, trip receipts and other rights enforced by L&I. 2026 minimums: trips starting in Seattle pay $0.70 per minute plus $1.63 per mile (at least $6.12 per trip); trips starting and ending outside Seattle pay $0.40 per minute plus $1.38 per mile (at least $3.55). Companies must pay at least every two weeks, including tips.
- Seattle App-Based Worker Minimum Payment Ordinance (city law)
- Since January 13, 2024, covered app-based (gig) workers in Seattle must get at least $0.47 per minute plus $0.80 per mile, or $5.34 per offer, whichever is greater, in 2026. They also have rights to upfront offer details and pay records.
- Six-part independent contractor test for workers' comp (RCW 51.08.195)
- A worker is outside workers' comp coverage only if all six conditions are met: free from control; outside the usual course or places of business (or pays for their own place of business); independently established business; files a Schedule C (or similar) with the IRS; registered with DOR and holds a UBI number; and keeps separate business books.
- Noncompete earnings threshold for independent contractors
- In 2026, a noncompete is enforceable against an independent contractor only if they earn more than $317,147.09 a year from the business enforcing it ($126,858.83 for employees) (RCW 49.62.020 and 49.62.030).
- State retirement program
- Washington Saves (and the Washington Small Business Retirement Marketplace) is launching. It is built around W-2 employers and does not cover 1099 contractors through the employer mandate.
Federal rules for 2026
W-2 or 1099 changes everything
On a W-2 your employer withholds tax and may offer a retirement plan. As a 1099 subcontractor you pay self-employment tax and quarterly estimates, but you can deduct tools, materials and job-site driving.
Tools and equipment
Tools, equipment, safety gear and work vehicles used for business are deductible; larger purchases can often be written off in the year you buy them.
Overtime deduction for W-2 workers
Non-exempt W-2 workers can deduct the overtime premium they are paid, up to $12,500 a year ($25,000 joint) from 2025 through 2028, subject to an income phase-out.
Quarterly estimated taxes
No one withholds tax from self-employment income, so you generally pay estimates four times a year if you expect to owe $1,000 or more. For 2026 income the federal dates are April 15, June 15 and September 15, 2026, and January 15, 2027. Paying 100% of last year's tax (110% if your AGI was over $150,000) in four equal installments avoids the underpayment penalty.
A worked example
| Self-employment tax | $9,891 |
|---|---|
| Self-employment tax per quarter | $2,473 |
| SEP IRA maximum | $13,011 |
| Solo 401(k) maximum | $37,511 |
Federal figures only, before income tax and state or local taxes. Computed from 2026 IRS limits (Notice 2025-67, Rev. Proc. 2025-32) and the SSA wage base.
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Questions
Do construction & trades in Washington pay state income tax?
Washington has no state income tax on wages or self-employment income. Washington has no individual income tax in 2026. Senate Bill 6346 (2026 session) adds a 9.9% tax for individuals and married couples filing jointly with adjusted gross income over $1 million, starting January 1, 2028, with first returns due in April 2029. A separate capital gains tax already applies: 7% on long-term gains above the standard deduction ($278,000 for 2025), plus 2.9% more (9.9% total) on gains over $1 million from tax year 2025.
Are there other Washington taxes for self-employed construction & trades?
Washington business and occupation (B&O) tax: A gross receipts tax on almost every business, including sole proprietors. The service rate in 2026 is 1.5% if the prior year's service income was under $1 million (1.75% from $1 million to $4,999,999.99, and 2.1% at $5 million or more). A small business credit of up to $160 a month for mainly service businesses ($55 a month for others) reduces or wipes out the tax. The Department of Revenue can excuse businesses under $125,000 a year in B&O gross income that owe no other DOR taxes from filing returns; SB 6346 raises this filing threshold to $250,000 for businesses that do not collect retail sales tax or public utility tax.
What Washington laws affect independent contractors and gig workers?
Rideshare (TNC) driver minimum pay and rights (RCW 49.46.300 to 49.46.350): Rideshare drivers get state minimum pay, trip receipts and other rights enforced by L&I. 2026 minimums: trips starting in Seattle pay $0.70 per minute plus $1.63 per mile (at least $6.12 per trip); trips starting and ending outside Seattle pay $0.40 per minute plus $1.38 per mile (at least $3.55). Companies must pay at least every two weeks, including tips. Seattle App-Based Worker Minimum Payment Ordinance (city law): Since January 13, 2024, covered app-based (gig) workers in Seattle must get at least $0.47 per minute plus $0.80 per mile, or $5.34 per offer, whichever is greater, in 2026. They also have rights to upfront offer details and pay records. Six-part independent contractor test for workers' comp (RCW 51.08.195): A worker is outside workers' comp coverage only if all six conditions are met: free from control; outside the usual course or places of business (or pays for their own place of business); independently established business; files a Schedule C (or similar) with the IRS; registered with DOR and holds a UBI number; and keeps separate business books. Noncompete earnings threshold for independent contractors: In 2026, a noncompete is enforceable against an independent contractor only if they earn more than $317,147.09 a year from the business enforcing it ($126,858.83 for employees) (RCW 49.62.020 and 49.62.030).
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Sources
- dor.wa.gov/taxes-rates/income-tax
- www.lni.wa.gov/workers-rights/wages/minimum-wage
- dor.wa.gov/forms-publications/publications-subject/special-notices/service-and-other-activities-rate-changes
- lni.wa.gov/workers-rights/industry-specific-requirements/transportation-network-company-drivers-rights/getting-paid
- www.seattle.gov/laborstandards/ordinances/app-based-worker-ordinances/app-based-worker-minimum-payment-ordinance
- app.leg.wa.gov/RCW/default.aspx?cite=51.08.195
- lni.wa.gov/news-events/article/25-27/
State and local facts researched from official sources and independently re-checked; last verified October 2026, next scheduled review 2027-01-02. Educational information for 2026, not tax, legal or investment advice. Rules change; check the official sources listed and a tax professional for your situation. Gigaverse AI, Inc. is a financial technology company, not a bank, and not itself a registered investment adviser or broker-dealer.