What a contribution saves in Washington
The table shows three owners, each making the largest first-year contribution their age and income allow. The saving is all federal.
| Owner | Contribution | Federal | Washington | Total |
|---|---|---|---|---|
| Sole proprietor, 45, $250,000 profit, single | $156,000 | $32,700 | No income tax | $32,700 |
| S corporation, 52, $250,000 salary and $250,000 profit, married | $223,000 | $50,800 | No income tax | $50,800 |
| Sole proprietor, 58, $600,000 profit, married | $282,000 | $93,000 | No income tax | $93,000 |
Savings are lower than the contribution times your top rate because a large contribution reaches down into lower brackets, and because for many owners it also reduces the 20% qualified business income deduction. Your own figures depend on your income, filing status and other deductions. The estimate works them out for you.
How Washington treats the deduction
With no state income tax, there is nothing to deduct at the state level and nothing to pay Washington when the money comes out.
Washington's taxes
Washington has no tax on wages or business income. It taxes long-term capital gains, and a 9.9% tax on income over $1 million is scheduled to start in 2028. Neither changes the savings from a cash balance contribution for 2026.
If you retire somewhere else
Money in a cash balance plan is taxed when it comes out, not when it goes in. Federal law stops a state from taxing retirement income paid from a qualified plan to someone who no longer lives there (4 U.S.C. 114). So the state you live in when you take the money out is the one that can tax it.
The reverse is also true: if you contribute while living in Washington and retire to a state with income tax, that state can tax the withdrawals.
Deadlines are federal
The dates that matter are the same in every state: the plan can be adopted for 2026 up to your business's extended filing deadline, and corporations have to run the salary the plan counts through payroll by December 31. See cash balance plan deadlines or find your dates.