Social Housing Tax

Voters Approve Social Housing Tax

In a special election held February 11, 2025, the voters of the City of Seattle approved the Social Housing Tax. The tax is imposed on businesses at a tax rate of 5% on compensation that exceeds $1 million paid in Seattle to an employee. The new tax went into effect January 1, 2025.

For tax year 2025, Seattle businesses subject to the Social Housing Tax will file their return and tender tax due by January 31, 2026. Thereafter, businesses subject to the Social Housing Tax will file and pay the tax on a quarterly basis.

You may view the text of the Social Housing Tax by clicking this link.

Register for the 2025 Social Housing Tax webinar (10/15/2025 at 1:00 p.m.) here.

  • Find out who is subject to the tax.
  • Learn how to determine your tax liability.
  • Understand tax filing requirements.
  • Have the chance to ask questions about the filing and payment process.

Please be aware that written communications and webinar registration information - including email addresses, names, and business affiliations - are potentially subject to public disclosure, in whole or in part, pursuant to the Washington State Public Records Act, RCW 42.56 et seq.

Download the hard copy Social Housing Tax form here.

Social Housing Tax FAQs

The Social Housing Tax is an excise tax imposed upon every person engaging in business in the City of Seattle that pays excess compensation.

“Excess Compensation” is annual compensation paid to an employee in excess of $1 million.

The Social Housing Tax rate is 5% of the excess compensation paid in Seattle for each employee of the taxpayer.
 

The Social Housing Tax imposes a 5% tax starting with the first dollar paid in Seattle to an employee in excess of $1,000,000.

No. “Excess compensation” is not linked to an inflation index.

The Social Housing Tax defines “excess compensation” as annual compensation to an employee in excess of $1,000,000. The Social Housing Tax adopts many of the definitions in the Seattle Payroll Expense Tax. Among those definitions is “compensation.” Compensation has the same meaning for purposes of the Social Housing Tax as it does for the Washington State Family and Medical Leave program. Compensation includes all payments for work performed, including commissions and bonuses and the cash value of all earnings paid in any medium other than cash and includes guaranteed payments and net distributions to owners of passthrough entities.

For employees who receive excess compensation, a business determines the amount of excess compensation paid in Seattle using either the Primarily Assigned Method or Hours Method defined in the Payroll Expense Tax. The taxpayer shall follow the same method for all employees for the entire tax year.

Hours method

The amount of compensation paid in Seattle to employees shall be:

  1. One hundred percent of the compensation paid to employees who perform work exclusively within Seattle; and
  2. For employees who perform work partly within and partly outside Seattle, the compensation paid in Seattle to those employees shall be, for each individual employee, the portion of the employee's annual compensation which the total number of the employee's hours worked within Seattle bears to the total number of the employee's hours worked within and outside Seattle.
  3. Taxpayers who calculate payroll expense using this method may exclude from the measure of the tax the payroll expense of employees who work within Seattle less than 40 hours during the tax year.

If the taxpayer does not select the method above, then the amount of compensation paid in Seattle to employees shall be determined as follows.

Primarily-assigned method

Compensation is paid in Seattle to an employee if:

  1. The employee is primarily assigned within Seattle;
  2. The employee is not primarily assigned to any business location of the taxpayer for the tax period and the employee performs 50 percent or more of their service for the tax period in Seattle; or
  3. The employee is not primarily assigned to any business location of the taxpayer for the tax period, the employee does not perform 50 percent or more of their service in any city, and the employee resides in Seattle.

An employee that performs more than 50 percent of their duties during the calendar year at a business location of the taxpayer will be primarily assigned to that business location.

No. The Social Housing Tax and the Payroll Expense Tax are separate excise taxes. With respect to each tax, for each calendar year, a taxpayer may elect to use either the “Hours Method” or the “Primarily Assigned Method” to determine compensation (Payroll Expense Tax) or excess compensation (Social Housing Tax) paid in Seattle. However, for each calendar year, for each tax, the taxpayer must consistently apply the method elected to determine compensation or excess compensation paid in Seattle.

Compensation includes all payments for personal services, including commissions and bonuses and the cash value of all compensation paid in any medium other than cash. Compensation means remuneration as that term is defined by the Washington State Family and Medical Leave program in RCW 50A.05.010. A list of items that are determined to be compensation can be found in Seattle Rule 5-981(2)(a)(ii)

The Social Housing Tax went into effect January 1, 2025.

No. Unlike the Payroll Expense Tax, the Social Housing Tax has no exemption for businesses that have less than a certain amount compensation paid in Seattle. 

No. The Social Housing Tax is imposed upon the business, not individual employees. Businesses may not subject employee compensation to withholding or deduction to pay the Social Housing Tax.

For calendar year 2025, all Social Housing Tax for the year shall be due and payable on the fourth quarter tax filing due January 31, 2026.  

After calendar year 2025, taxpayers will file returns and pay Social Housing Tax in quarterly installments unless the Director assigns a different reporting period to the taxpayer.

The first quarter that a taxpayer has excess compensation (more than $1,000,000 in a calendar year) paid in the city to an employee, the taxpayer must file a Social Housing Tax return and pay the tax due.

No, the first quarter that a taxpayer pays excess compensation (annual compensation in excess of $1,000,000) in the City to an employee, the taxpayer must file a Social Housing Tax return and pay the tax due. After December 31, 2025, taxpayers may use the excess compensation calculated in the prior calendar year to estimate reporting in the current calendar year and correct the reporting for the current year amount on the fourth quarter return. The taxpayer will report amounts on the fourth quarter return that reflect adjustments that correct inaccuracies in excess compensation and Social Housing Tax due as estimated on the first, second and third quarter returns.

Unlike the Payroll Expense Tax, the Social Housing Tax does not include a prior year Seattle payroll expense threshold. Therefore, whether a person engaging in business within Seattle needs to file a Social Housing Tax return will depend upon whether the business paid annual compensation in Seattle to an employee in excess of $1,000,000.

The Payroll Expense Tax and the Social Housing Tax are separate excise taxes imposed on persons engaging in business in Seattle. If your business pays excess compensation to an employee (annual compensation in excess of $1,000,000), then your business will be subject to the Social Housing Tax. Further, if your business has prior year payroll expense paid in Seattle that exceeds the applicable Payroll Expense Tax threshold and retains at least 1 employee with annual compensation that meets the annual employee compensation threshold, then your business will also be subject to the Payroll Expense Tax.  For additional information on the Payroll Expense Tax, please visit the Payroll Expense Tax web page.

The Social Housing Tax can be paid electronically or manually. FileLocal is the online tax filing portal for the City of Seattle. This is the same portal many taxpayers currently use to file and pay a variety of other Seattle business taxes, including B&O, Payroll Expense, Commercial Parking, Admissions, etc. Manual forms can be completed and mailed to the address provided on the form. Returns are not deemed filed until both tax filing and payment are received. 

The Social Housing Tax can be filed through FileLocal using the business's customer number. Persons engaging in business in Seattle must have a Seattle Business License Tax Certificate. This certificate contains the customer number assigned to the business. Businesses filing the Social Housing Tax manually need to include the customer number as well as legal name and address on the filed form. If a business does not have a Business License Tax Certificate, they can apply for a Business License Tax Certificate at FileLocal. If you are filing returns as a preparer on behalf of another business, you can create a Preparer Account in FileLocal to file returns on behalf of your client. The business will need to grant you permission to file their returns in FileLocal

The Office of City Finance has updated the Social Housing Tax web page. This update includes a link to a Social Housing Tax return.

Compensation does not include:

  1. Tips;
  2. Supplemental benefit payments made by an employer to an employee in addition to any paid family or medical leave benefits received by the employee;
  3. Employee exercised stock options (incentive stock options (ISOs) or non-qualified stock options (NQSOs));
  4. Payments provided to cover a past or future cost incurred by the employee as a result of the employee's expected job functions;
  5. Employer contributions into retirement or disability plans; or
  6. Payments to an owner of a pass-through entity that are not earned for services rendered or work performed (i.e., return of capital, investment income, or other passive activities). 

Compensation includes the value of stocks transferred to the employee during the calendar year if part of a compensation package. This would include stock grants, Restricted Stock Units (RSUs), and Performance Stock Units (PSUs). Stock options and any related gains from exercising stock options are not considered compensation for purposes of the Social Housing Tax. 

Yes, compensation also includes employee contributions to deferred compensation plans (e.g., 401(k), 403(b), or other deferred compensation plans) in which a portion of an employee's salary or wages are set aside to be paid at a later date. 

Compensation means remuneration as defined by the RCW 50A.05.010. If the amounts are included as compensation for purposes of the Washington State Employment Security Department's State Family and Medical Leave program, then they should be included for purposes of the Social Housing Tax. If employee deductions would not reduce wages reported to the Washington State Employment Security Department (ESD) for purposes of the Family and Medical Leave program, then they would not be excluded from compensation for the Social Housing Tax.

Compensation is based on gross pay. "Excess compensation" means gross annual compensation to an employee in excess of $1,000,000.

Businesses subject to the Social Housing Tax are required to maintain and keep complete and adequate records. Records must be kept in such a manner as to enable the tax administrator to determine the Social Housing Tax liability of the taxpayer. Records retained must be presented upon request of the tax administrator and demonstrate the excess compensation of the business, including but not limited to; where employees are primarily assigned, perform their services, and reside, and employee compensation. Examples include but are not limited to; W-2 and earnings summaries and work papers and other employment tax records; work location schedules; teleworking agreements between employee and employer; payroll expense reports; copies of state employment security returns and their workpapers; etc.

A business may maintain several types of records that may be relevant to employee work hours. Examples include but are not limited to

  1. employee work calendars,
  2. employee timecard data (either electronic/spreadsheet or hard copy),
  3. documents generated by time tracking software,
  4. employee billable hours data, and/or
  5. Washington State Department of Employment Security records.

Certain business activities are exempt from the Social Housing Tax. These include:

  • Excess compensation paid in Seattle to an individual independent contractor whose compensation is included in another business's payroll expense; and
  • Any person engaged in business in Seattle that is preempted from taxation by cities under federal or state statutes or regulations. These include insurance businesses and their appointed insurance producers; businesses that only sell motor vehicle fuel; businesses that only distribute liquor; and federal, state, and local government entities. 

No. Unlike the Payroll Expense Tax, grocery businesses are subject to the Social Housing Tax.

Yes. The Social Housing Tax does not include a general tax exemption for nonprofit organizations. 

No. Unlike the Payroll Expense Tax, the Social Housing Tax does not include a nonprofit healthcare entity deduction. Persons engaging in business within Seattle as a nonprofit healthcare entity who pay excess compensation to an employee in Seattle must file Social Housing Tax returns and pay the tax due.

You may view the text of the Social Housing Tax by clicking this link or by clicking the link on the Social Housing Tax web page.

You may contact License and Tax Administration at (206) 684-8484 or tax@seattle.gov.

Office of City Finance

Jamie Carnell, Director
Address: 700 5th Avenue, Seattle, WA, 98104
Mailing Address: P.O. Box 94669, Seattle, WA, 98124-4669
ocf@seattle.gov

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City Finance manages the financial operations of the City of Seattle and oversees the City’s financial controls and enterprise reporting while working to achieve the goals set by the Mayor and the City Council.