There are some major changes taking place regarding taxes for those residing in Washington State. You may or may not have heard about these changes, and that’s why we want to provide the information, as well as some solutions, that may be extremely beneficial to you.
Just recently, the state of Washington passed a state payroll tax called the “Washington State Long-Term Care Trust Act.” This tax will be imposed on every employee at a rate of $58 per $10,000 earned, per year, with no cap! So, for every $100k you earn, you’ll pay an extra $580 every single year. (For those that earn $300k/yr., you’ll pay an extra $1,740/yr. for this LTC tax. For those that earn $500,000/yr., that’s almost $3,000/yr. in extra taxes!). At that rate, assuming the tax doesn’t change, if someone earning $300,000 had their income increase 3% per year to keep up with inflation, they would pay a total of over $46,500 in tax! And yet, the biggest kicker is that the maximum payout of the LTC Coverage from the state is only $36,500 in a lifetime! That’s it!
There may be a number of reasons why Washington State would do this, but the main reason is because the cost of Long-Term Care is extremely expensive to the states! According to the Washington State Department of Social and Health Services budget, the total budgeted cost was over $2.3 Billion. This is one way that the State of Washington has decided to try and reduce that cost to the state budget.
Calculate Your Specific LTC Annual Tax Cost
Calculate Your Annual Tax Cost Associated with the LTC Act
Total Tax Cost Associated with the Washington LTC Tax
Regardless of the reason, this tax will start January 1, 2022. You may be wondering, “Is there any way to opt-out of this tax?” And the answer is, “Absolutely yes!” But there’s a deadline! As of right now, the deadline to have equal or better Long-Term Care Coverage in place is November 1st, 2021.
So of course, the follow-up question is, “How do I opt-out?” The answer: In order to opt-out, you’ll need to fill out an exemption application on the Employment Security Department’s website (https://esd.wa.gov) between October 1, 2021 and December 31, 2022 attesting to having sufficient Long-Term Care Coverage purchased before the November 1, 2021 deadline. However, be careful because not all insurance coverage is classified as Long-Term Care Coverage.
So how can you find out what your options are, and, more importantly, what’s best for you? We are more than happy to talk directly with you about your specific options, because not everyone is the same. Your needs may be different than the next person’s. For some people, an actual LTC Insurance policy may be best; for others, a LTC Rider which is part of another insurance policy may work.
We want to help educate you, answer all your questions, and get you into something that will allow you to “opt-out” of this state tax, ultimately saving you money, providing you with better protection, and giving you the peace-of-mind you deserve.