Self-Employed Taxes in Washington (No Income Tax, but B&O)

No state income tax — but Washington taxes your gross receipts, not your profit

Washington is famous for having no personal income tax — but it has a tax that catches freelancers off guard precisely because it doesn't work like an income tax at all. The B&O tax is charged on your gross receipts, before expenses. Understand that distinction and you'll plan correctly; miss it and you'll under-budget.

General information only, not personal tax advice. Verify with the IRS (irs.gov) and the Washington Dept. of Revenue (dor.wa.gov) or a licensed tax professional.

The good part: no personal income tax

Washington levies no personal state income tax on wages or self-employment income. (Note: the state does impose a capital gains tax on high-level investment gains above a threshold — relevant to investors, not typical freelance earnings. Verify current rules.) For ordinary freelance income, there's no state income-tax layer.

The catch: the B&O tax is on revenue, not profit

The Business & Occupation (B&O) tax is Washington's gross-receipts tax. The critical point for freelancers: it applies to your gross income, not your net profit. There's no deduction for your business expenses against the B&O tax — the rate is applied to what you bring in.

The rate varies by business classification (service businesses, which is most freelancers, have their own rate — verify it). The good news: Washington offers a small-business B&O credit and filing thresholds, so very small operators may owe little or nothing. But you generally still need to register and file, even at $0 due.

What you owe, in order

  1. Federal income tax on net profit (Schedule C).
  2. Self-employment tax — 15.3% (Schedule SE); half deductible.
  3. Quarterly federal estimated payments (Form 1040-ES).
  4. Washington B&O tax on gross receipts (register with DOR; file monthly/quarterly/annually depending on size).
  5. Sales tax if you sell taxable goods/services.

Deductions cut federal + SE tax (not B&O)

Remember the quirk: your deductions reduce your federal and SE tax, but not the B&O tax (which is on gross). Still, the federal savings are large:

  • Mileage (standard rate, verify) or actual vehicle costs.
  • Home office — simplified or actual.
  • Phone, internet, software, equipment (Section 179).
  • Self-employed health insurance and QBI (up to 20%).
  • Retirement — SEP-IRA / solo 401(k).

Worked example: a Seattle consultant

Anna grosses $120,000 consulting, with $20,000 of expenses ($100,000 net). Federally, she's taxed on the $100,000 net (plus SE tax, with deductions reducing both). For B&O, the service rate applies to her $120,000 gross — expenses don't reduce it — though the small-business credit may soften the lowest tiers. The takeaway: she budgets for B&O off her revenue, and for federal/SE off her profit. Two different bases, two different mental buckets.

How TaxBot helps Washington freelancers

TaxBot tracks both your gross receipts (for B&O) and your deductible expenses (for federal + SE tax), so you can budget each correctly instead of confusing the two bases. Scan receipts, track mileage, and always know what to set aside for quarterly federal payments and your B&O filing.

Your action plan

  1. Register with the WA Dept. of Revenue for B&O even if small.
  2. Budget B&O off gross revenue; budget federal + SE off net profit.
  3. Set up quarterly federal estimated payments.
  4. Track deductions — they cut your federal and SE tax substantially.