These news laws take effect in Washington on July 1
OLYMPIA, Wash. - Several laws take effect in Washington starting July 1, ranging from new taxes and benefits to guidelines on rural data centers and healthcare licensing.
Many of the laws, which were passed during the 2026 legislative session, will go into effect later. Most notably, Washington's controversial "millionaires tax" doesn't go into effect until 2028.
Data center tax exemptions expire
Engrossed Substitute Senate Bill 6231 expires existing sales and use tax exemptions for data centers that previously got them. New data centers can still apply for tax exemptions, but existing data centers will not be able to get tax breaks on replacement server equipment.
This law comes into effect amid growing scrutiny into AI data centers, especially their effect on area water supplies, noise pollution and more. Seattle banned the construction of AI data centers for a year.
Mortgage interest B&O tax exemption
Substitute House Bill 2089 restricts the business and occupation (B&O) tax exemption for mortgage interest income. Currently, lenders can deduct interest income earned from first mortgages if they operate in 10 or fewer states.
Starting July 1, 2026, that state requirement will be replaced with a financial threshold — specifically for lenders with less than $10 billion in annual mortgage originations.
Revenue from this will be moved to the state's wildfire preparation and firefighting efforts.
The Capitol Building in Olympia, Washington. (FOX 13 Seattle)
State tax codes changing
Engrossed Substitute Senate Bill 6346 makes multiple adjustments to state tax codes, including temporary staffing at hospital-based clinics, definitions for certain activities for the purposes of taxing, and exempts sales of certain retail services to schools and libraries from retail sales and use taxes.
That bill also includes the "millionaires tax" which, starting in 2028, will impose a 9.9% tax on income over $1 million. In 2029, the same bill will partially repeal sales taxes on specialized service, and exempt taxes on diapers, over-the-counter drugs and hygiene products.
It also expands eligibility for the Working Families Tax Credit, increases the B&O tax credit for small businesses, raises the B&O tax return filing threshold, and adds exemptions to B&O surcharges for high-grossing businesses.
Local government taxes
Engrossed Substitute House Bill 2442 allows local governments to issue their own property tax levies and levy increases for public health clinics.
The law also allows local governments to use existing revenue streams for new purposes — including Real Estate Excise Tax revenue for nuisance properties, local rental car taxes for criminal justice, and housing tax revenue for affordable housing rehabilitation, rental assistance, and operations.
Another provision allows local governments to use local taxes to assist children and families, but that goes into effect on January 1, 2027.
Estate tax modifications
Engrossed Senate Bill 6347 restores state estate tax rates to levels in place prior to July 2025, ranging from 10% to 20% depending on the taxable estate value. The law also modifies the applicable exclusion amount for the estate tax filing threshold and updates the maximum deduction for qualified family-owned business estates. The bill takes effect June 11, 2026, and applies to the estates of decedents dying on or after July 1, 2026.
Estate taxes, pensions, and healthcare
Other immediate changes taking effect July 1 include:
- Estate taxes: Engrossed Senate Bill 6347 restores state estate tax rates to their pre-July 2025 brackets, ranging from 10% to 20%. It also alters the estate tax filing threshold and updates deductions for family-owned businesses.
- Pension boost: Substitute Senate Bill 5862 implements a one-time, 3 percent cost-of-living adjustment for retirees in Plan 1 of the Public Employees' Retirement System and the Teachers' Retirement System, capped at $110 per month.
- Ambulance fees: House Bill 2531 locks the annual ambulance provider quality assurance fee to the rate active on July 4, 2025, and directs the Health Care Authority to calculate provider add-on payments based on available fund balances.
- Nurse licensing: Substitute House Bill 2339 updates professional titles for advanced registered nurse practitioners and permits certain certified registered nurse anesthetists without prior prescriptive authority to continue administering specific substances.
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The Source: Information in this story comes from the Washington State Department of Revenue's 2026 legislation report, as well as previous coverage from FOX 13 Seattle.