Seattle Social Housing Tax

At A Glance

• The voters of Seattle, Washington approved a new Social Housing Tax for employers effective January 1, 2025. 
• The 5% tax will apply to annual compensation above $1,000,000 paid in Seattle to any employee. 

Introduction

Seattle, Washington voters approved a new employer payroll expense tax called the Social Housing Tax. This new tax will generate and allocate funds to support affordable housing. The 5% tax is on annual compensation exceeding $1,000,000 paid to any employee that works in the city. The Social Housing Tax is retroactive to January 1, 2025, and will be an annual tax for the first year with the returns and payments due on January 31, 2026. After the first year, the tax will be due on a quarterly basis. 

The Social Housing Tax is an employer-funded tax, meaning employers may not make deductions from an employees' compensation to pay the tax.

This new payroll expense tax is in addition to the current Seattle Jumsptart Payroll Expense Tax.

Exemption

Businesses exempt from this tax include:

• Any individual who is an independent contractor for purposes under the business license tax under subsection 5.45.090.S and whose excess compensation is included in the tax paid by another business.
• Businesses preempted from taxation by cities pursuant to federal or state statutes or regulations (5.38.040.A.4,) such as:
  • Insurance businesses and their agents as defined by RCW 48.01.050 and 48.17.010, respectively, and whose total revenue is exempt from the business license tax per Chapter 5.45.
  • Businesses that only sell, manufacture, or distribute motor vehicle fuel as defined in RCW 82.38.020 and exempted under RCW 82.38.080.   
  • Businesses that only distribute or sell liquor as defined in RCW 66.04.010 and exempted in RCW 66.08.120.  
  • Federal and state government agencies and any local governmental entity.