Changes to property tax relief programs and state school levy

Intended audience: County assessors, county treasurers, local taxing districts, property tax exemption, deferral, and grant program participants.

The 2026 Legislature passed Engrossed Substitute Senate Bill 6162 (ESSB 6162) , which makes changes to the property tax relief programs for low-income senior citizens, people with disabilities, and veterans, and makes changes to the state school levy. This legislation is effective June 11, 2026, and applies to property taxes levied for collection in 2027. 

What the bill does 

This bill amends RCW’s 84.36.381, 84.36.383, 84.56.020, 84.52.065, 84.36.630. Below describes the notable changes. 

Exemption program updates 

Combined disposable income (CDI)  

Revises the definition of combined disposable income (CDI) to: 

• Authorize a standard deduction of $7,500 per applicant and an additional $7,500 for the applicant’s spouse, or domestic partner, in lieu of the itemized deduction amount for qualifying medical expenses when calculating CDI.
• Allow a deduction of up to $6,000 from CDI for income received from renting residential living space located on the applicant’s primary residence parcel. The deduction applies only to non-short-term rental income. Do not include income from short-term rentals of lodging when calculating the deduction.
• Exclude combat-related special compensation (CRSC) from the calculation of CDI.

Income threshold amounts 

Increases the percentage of county median household income allowable for each income threshold effective Aug. 1, 2026. The Department of Revenue calculates and publishes county-specific income thresholds every three years. The 2027 tax year thresholds are currently published. The next adjustment will be for tax year 2030.   

Revised exemption program income thresholds (IT1-IT3) 

Income threshold (IT)	Tax Years 2019 and earlier	Tax years 2020 through 2023	Tax years 2024 through 2026	Tax years 2027 and after
IT1	$30,000	The greater of IT1 for the previous year or 45% of median household income of the county where the residence is located.	The greater of IT1 for the previous year or 50% of median household income of the county where the residence is located.	The greater of IT1 for the previous year or 60% of median household income of the county where the residence is located.
IT2	$35,000	The greater of IT2 for the previous year or 55% of median household income of the county where the residence is located.	The greater of IT2 for the previous year or 60% of median household income of the county where the residence is located.	The greater of IT2 for the previous year or 70% of median household income of the county where the residence is located.
IT3	$40,000	The greater of IT3 for the previous year or 65% of median household income of the county where the residence is located.	The greater of IT3 for the previous year or 70% of median household income of the county where the residence is located.	The greater of IT3 for the previous year or 80% of median household income of the county where the residence is located.

Levels of exemption 

Increases the levels of exemption that can be received by participants in the senior exemption program as follows: 

Income threshold (IT)	Level of exemption (current)	Level of exemption (2027 and after)
All income threshold categories	Exempt from paying Part 2 of the state school levy and all local excess property taxes on a qualified primary residence.	Exempt from paying the state school levy and all local excess property taxes on a qualified primary residence.
IT1	Exempt from paying regular property taxes on the greater of $60,000 or 60% of the valuation of their residence (no limit).	Exempt from paying local regular property taxes on the greater of $80,000 or 80% of the valuation of their residence (no limit).
IT2	Exempt from paying regular property taxes on the greater of $50,000 or 35% of the valuation of their residence, but not to exceed $70,000 of the valuation.	Exempt from paying local regular property taxes on the greater of $70,000 or 45% of the valuation of their residence, but not to exceed $200,000 of the valuation.
IT3	Not exempt from paying regular property taxes.	Not exempt from paying local regular property taxes.

State school levy 

Starting with the 2027 tax year, the state school levy returns to a single levy. The levy rate for the 2027 tax year is $2.075355 per $1,000 market value.  

The state school levy is subject to adjustments for the following: 

• The difference in taxable values reported to the Department of Revenue (Department) after October 1 of the preceding year and the actual taxable value used to apportion taxes by the individual county assessors.
• Unpaid taxes for each county from the fifth receding year.
• Court ordered refunds.
• The ratio of taxable assessed value in relation to the true and fair market assessed value in each county as determined by the Department.

Senior citizens and disabled persons receiving a property tax exemption under RCW 84.36.381 are fully exempt from the state school levy. 

Each county’s property tax statement must identify the state property tax as the “state school levy”.  

For collection in the 2028 tax year and thereafter, the state school levy is subject to growth limits and other allowable increases as it was prior to ESSB 6162. 

Deferral and veteran grant program updates 

Some of the changes described above also apply to the deferral and veteran grant programs. These changes are as follows: 

Senior Citizen and People with Disabilities Deferral Program 

• CDI changes.
• Increase in income threshold amount effective Aug. 1, 2026.

Income threshold	Tax Years 2019 and earlier	Tax years 2020 through 2026	Tax years 2027 and after
Deferral threshold	$45,000	The greater of income threshold for the previous year or 75% of median household income of the county where the residence is located.	The greater of income threshold for the previous year or 90% of median household income of the county where the residence is located.

Limited Income Deferral Program 

• CDI changes only.

Grant Assistance for Widow/Widowers of Veterans 

• CDI changes only.

Questions and Answers (Q&A) 

Q: How can I determine the income threshold for my county? 

A: Income thresholds for each county are available on the Department of Revenue’s website: Senior citizens and people with disabilities exemption and deferred income thresholds | Washington Department of Revenue. 

Q: I am a current participant in the exemption program and due to the increased income thresholds, I will qualify for a greater level of exemption in 2027. Am I required to submit another application? 

A: No.  Current participants will automatically be placed into the appropriate level of exemption by their county assessor and do not need to file any paperwork to request this change. 

Q: My sister and I own a home and both reside in that home.  Are we both eligible for the standard deduction of $7,500 (totaling $15,000)? 

A: No.  The standard deduction only applies to the applicant and their spouse or domestic partner. The qualifying applicant can claim the standard deduction of $7,500.   

CDI is defined in RCW 84.36.383(2) as the disposable income of the applicant, their spouse or domestic partner and each cotenant, less amounts paid by the applicant and their spouse or domestic partner for allowable expenses. The statute does not include a provision for cotenant expenses to be used as an allowable deduction. 

A cotenant is someone who has an ownership interest in the home and lives in the home. If you are the qualifying applicant, your sister would be considered the cotenant.    

Q: I am a veteran who is a current participant in the exemption program and my CRSC payment was included in the income calculation. For tax year 2027, CRSC will no longer be included and this might affect the level of exemption I qualify for. Am I required to submit another application?   

A: Yes. You must file a status change notice with your county assessor to recalculate your 2026 income without the CRSC. 

The county assessor will have your exemption level on file. If your total income causes you to move into a different category based on the income threshold changes, the county will automatically make this change for you. 

They cannot remove your CRSC payment automatically. You must provide them with a status change application and income documentation from 2026 to recalculate your income without the CRSC.   

Example:  A qualifying applicant resides in Okanogan County, has a CDI of 40,000 and is receiving the exemption in income threshold 3.   

County	Income Threshold 1	Income Threshold 2	Income Threshold 3
Okanogan (TY2026)	30,300	35,350	41,000

For tax year 2027, this applicant’s income of 40,000 will allow them to move to income threshold 2. The county will make this change automatically. 

County	Income Threshold 1	Income Threshold 2	Income Threshold 3
Okanogan (TY2027)	37,000	43,000	49,000

This applicant has CRSC income included in their overall total of $40,000.  This CRSC payment is $5,000/year.  They must file a status change notice and provide income documentation to the county for recalculation.  After removing the CRSC, the applicant’s CDI is now $35,000 and qualifies for income threshold 1. 

County	Income Threshold 1	Income Threshold 2	Income Threshold 3
Okanogan (TY2027)	37,000	43,000	49,000

Q: I have two rentals that I receive rental income from. One is an Airbnb on my primary residence and the other is a single family home on a separate parcel. Are either of these rentals eligible for the $6,000 rental deduction? 

A: No. Short-term rentals, such as Airbnb stays of less than 30 days, are not eligible for the rental income deduction. Only long-term rentals (30 days or more) qualify. 

In addition, the $6,000 rental income deduction only applies to the rental income from living space located on your primary residence parcel (such as your main home or an ADU).  Rental income from a separate parcel is not eligible for this deduction. 

Q: If I have an eligible rental on my primary residence, can I claim both the $6,000 rental deduction and the $7,500 standard deduction? 

A: No. You must choose one or the other. The $6,000 rental income deduction is only available if you decide to itemize your deductions. Itemized deductions include the allowable items listed in RCW 84.36.383(2)(a-n), which includes the rental income deduction. If you do not itemize, you may instead choose the $7,500 standard deduction, but you cannot claim both. 

Questions? 

Please visit our property tax page, call the Property Tax Division at 360-534-1400, or contact your county assessor.