Why Washington Is a Top Market for Short-Term Rentals
Washington State generated $22.3 billion in tourism spending in 2023, driven by a combination of tech-powered urban economies, dramatic natural landscapes, and a wine region that’s finally getting national recognition. Seattle alone draws over 40 million visitors annually for business travel, conventions, and tourism. But the real STR opportunity in Washington extends far beyond the city limits.
The San Juan Islands rank among the most desirable vacation rental destinations on the entire West Coast. Leavenworth — a Bavarian-themed village in the Cascades — fills to capacity nearly every weekend year-round. Walla Walla’s wine country has transformed from a sleepy agricultural town into a destination that rivals smaller Napa subregions. And the Olympic Peninsula offers the kind of raw, rainforest-meets-ocean scenery that commands premium nightly rates from travelers who want something truly different.
Washington’s economic foundation matters for STR operators too. The state has no personal income tax. Combined with Seattle’s high-income tech workforce (Amazon, Microsoft, Google, Meta all have major campuses here), you get a population that travels frequently, books premium accommodations, and values unique properties over cookie-cutter hotels. These aren’t just tourists — they’re high-earning professionals booking weekend getaways for $300-$500 per night without blinking.
The rental arbitrage model works particularly well in Washington’s secondary markets. Towns like Leavenworth, Port Angeles, and Ellensburg have landlords accustomed to seasonal fluctuations and often welcome the stability of a professional operator managing their property year-round. Meanwhile, property values in many of these markets remain 40-60% below Seattle metro prices, making ownership viable for investors who can’t touch the city’s $800K+ median home price.
Washington Short-Term Rental Laws and Regulations
Washington’s STR regulatory landscape is a patchwork. The state provides a tax framework and basic consumer protection requirements, but cities and counties control the operational rules. This creates both opportunity and risk — some jurisdictions are welcoming, others are actively hostile to short-term rentals.
State-Level Requirements
Washington State requires all short-term rental operators to:
- Register with the Washington State Department of Revenue for a Business License and UBI (Unified Business Identifier) number — this is free and can be done online through the DOR’s Business Licensing Service
- Collect and remit the state sales tax (6.5%) plus applicable local sales taxes on all rental income
- Collect and remit any applicable local lodging taxes (hotel/motel taxes), which vary by jurisdiction
- Comply with SB 5576 (passed 2024), which authorized local governments to impose excise taxes specifically on STR platforms and operators
- Maintain a valid Washington State business license ($0 for most small businesses, though some cities charge a local Business & Occupation tax)
Washington’s state-level framework is relatively light-touch compared to Oregon or California. The real regulatory weight comes at the local level. SB 5576, which took effect in 2025, gave cities and counties additional taxing authority over STRs, leading several jurisdictions to implement new local excise taxes ranging from 1-3% on top of existing lodging taxes.
Key City Regulations
Seattle: Seattle requires a Short-Term Rental Operator License ($75/year) and registration with the Department of Finance and Administrative Services. Operators must designate a local contact available 24/7 and carry liability insurance. Seattle limits operators to two STR units unless they obtain a platform-specific permit for additional units. The city mandates that listings display the license number. Unlike Portland, Seattle does not cap nightly usage for any license type, making it significantly more operator-friendly for investors.
Tacoma: Tacoma requires an STR license through the Tax and License Division. The city enforces occupancy limits and requires hosts to collect Tacoma’s combined lodging tax rate of approximately 12.4% (state + local + convention center tax). Tacoma’s approach is moderate — fewer restrictions than Seattle on total unit count, but the city has been stepping up enforcement of unlicensed properties since 2024, sending violation letters to hosts identified through platform scraping.
San Juan County (San Juan Islands): The islands have some of Washington’s most specific STR regulations. San Juan County requires a Vacation Rental Permit, and properties must comply with strict septic system requirements (a major issue on islands without municipal sewer). The county caps the number of vacation rental permits in certain areas, particularly on Orcas Island and San Juan Island. Properties must maintain a guest registry, comply with noise ordinances, and designate a local property manager available within 60 minutes.
Leavenworth (Chelan County): This tiny town of 2,000 residents attracts over 2 million visitors annually, creating enormous STR demand. Chelan County requires a Vacation Rental Permit for properties outside city limits. Within city limits, Leavenworth has implemented an STR cap limiting permits to a percentage of total housing units in each zone. The cap has made existing permitted properties extremely valuable — and new entrants need to monitor for permit availability.
Recent Regulatory Changes (2025-2026)
SB 5576’s implementation in 2025 triggered a wave of local tax increases. Chelan County added a 2% STR-specific excise tax. San Juan County implemented a 1.5% surcharge earmarked for affordable housing initiatives. Several smaller jurisdictions are still finalizing their response to the new authority granted by SB 5576.
Seattle expanded its enforcement partnership with Host Compliance in mid-2025, resulting in over 200 violation notices to unlicensed operators. The city also began requiring platforms to verify license numbers before activating new listings — a significant shift that effectively prevents unpermitted properties from appearing on Airbnb or VRBO within Seattle city limits.
The Washington State Department of Commerce launched a statewide STR data collection initiative in late 2025, requiring platforms to submit quarterly reports on active listings, revenue generated, and host compliance status. This data will inform future state-level legislation expected in the 2026-2027 session.
For current regulatory information, check the Washington State Department of Revenue business licensing portal and your local city or county planning department.
Tax Obligations for Washington Airbnb Hosts
Washington’s tax structure is one of its strongest advantages for STR operators. No personal income tax means your Airbnb profits are taxed only at the federal level — the same advantage Nevada offers, and one that Oregon and California hosts can only dream about. On a property generating $60,000 in net annual profit, that’s roughly $5,000-$7,000 in state tax savings compared to Oregon.
But Washington does tax short-term rentals through other mechanisms:
State and Local Sales Tax: Short-term rentals in Washington are subject to retail sales tax. The state rate is 6.5%, plus local rates that vary by location. Combined rates range from 7.5% to 10.5% depending on where your property sits. Seattle’s combined rate is 10.25%. These taxes apply to the total rental charge, including cleaning fees.
Special Hotel/Motel Tax: Most Washington cities and counties impose additional lodging taxes, typically 2-4%, on top of sales tax. These are often earmarked for tourism promotion and convention facilities. Seattle charges a 7% hotel/motel tax on top of the 10.25% sales tax, bringing the total tax rate to approximately 17.25% — though Airbnb collects and remits most of this automatically in Seattle.
Convention and Trade Center Tax: King County properties within the convention center tax district pay an additional 2.8% tax. This applies to most Seattle and some Bellevue properties.
Business & Occupation (B&O) Tax: Washington’s B&O tax is a gross receipts tax (not an income tax). The rate for service businesses is 1.5% of gross revenue. Some cities impose their own B&O tax on top of the state rate. Seattle’s city B&O tax is 0.415% for service businesses. These apply to gross revenue, not net profit — meaning you owe B&O tax even in months where expenses exceed income.
New SB 5576 Excise Taxes (2025+): As noted above, local governments now have authority to impose additional excise taxes specifically targeting STRs. These range from 1-3% depending on jurisdiction. This is a new and evolving cost that operators should factor into revenue projections.
Tax collection in Washington is complicated by the layered structure. Airbnb collects state sales tax and some local lodging taxes automatically, but not all jurisdictions are covered. You’re responsible for confirming which taxes the platform handles and filing directly for the rest. The Washington Department of Revenue provides a tax rate lookup tool by address — use it before running your first financial projection.
Best Cities for Airbnb in Washington
Seattle
Seattle is Washington’s highest-volume STR market, powered by a tech economy that brings business travelers year-round and a tourism scene anchored by Pike Place Market, the Space Needle, and a world-class food and coffee culture. Average daily rates range from $130 to $280, with downtown and Capitol Hill properties commanding the upper end. Annual occupancy for well-managed listings runs 72-85%.
What sets Seattle apart is the consistency. Unlike seasonal markets, Seattle delivers bookings 12 months a year. Convention traffic, business travel, sports events (Seahawks, Kraken, Sounders), and summer tourism all layer on top of each other. A well-positioned two-bedroom in Capitol Hill or Ballard can gross $50,000-$75,000 annually. The two-unit limit per operator keeps supply somewhat constrained, which protects pricing power for licensed hosts.
Tacoma
Tacoma has emerged as Seattle’s more affordable sibling — for both visitors and operators. Located 30 miles south, Tacoma offers lower property prices, lower lease costs for arbitrage operators, and a developing cultural scene centered around the Museum of Glass, Point Defiance Park, and a revitalized downtown. Average daily rates run $100-$190, with occupancy at 62-74% annually.
The Tacoma market is particularly attractive for new operators because entry costs are lower and regulation is more moderate than Seattle. A two-bedroom near the Stadium District or Proctor area can gross $30,000-$48,000 annually. Not as flashy as Seattle numbers, but the margins can actually be better when you factor in a lease that’s $800-$1,200/month cheaper than a comparable Seattle unit.
San Juan Islands
Friday Harbor, Orcas Island, and Lopez Island represent Washington’s luxury vacation rental tier. Guests reach the islands via Washington State Ferries or seaplane, which adds an adventure component that justifies premium pricing. Average daily rates range from $200 to $500, with waterfront properties and private cabins commanding the top end. Occupancy is highly seasonal: 80-95% from June through September, dropping to 30-45% in winter.
Annual gross revenue for a well-managed San Juan Islands property: $50,000-$95,000. The permit cap and septic requirements create real barriers to entry, which is exactly why existing operators enjoy strong pricing power. This is primarily an ownership market — arbitrage is difficult due to limited rental inventory and landlords who are extremely selective. If you can acquire a permitted property, though, you’re in one of the most defensible STR markets in the Pacific Northwest.
Leavenworth
This Bavarian-themed town in the Cascade foothills punches absurdly above its weight. With just 2,000 permanent residents but over 2 million annual visitors, the ratio of tourism demand to housing supply creates pricing power that rivals major cities. Average daily rates for permitted STRs: $180-$380. Occupancy runs 70-85% annually thanks to year-round events — Oktoberfest, Christmas Lighting Festival, summer music festivals, and winter skiing at Stevens Pass and Mission Ridge.
Leavenworth’s STR cap means getting a permit is the hard part. Once you have one, you’re operating in a market where demand consistently exceeds supply. A three-bedroom chalet-style property with mountain views can gross $65,000-$100,000 annually. Properties in the Bavarian Village walking district command a 20-30% ADR premium over those a five-minute drive away.
Walla Walla
Washington’s wine country has quietly become a legitimate STR market. Walla Walla is home to over 120 wineries and tasting rooms, drawing wine tourists year-round with peak season from May through October. Average daily rates: $140-$260. Occupancy is more moderate at 55-68% annually, but the guest quality is exceptional — wine tourists spend freely on premium accommodations, dine at upscale restaurants, and rarely cause property issues.
Annual gross revenue for a well-appointed Walla Walla property: $35,000-$55,000. The market is still maturing, and current regulation is relatively light — a city business license and standard lodging tax compliance. This makes Walla Walla one of the most accessible premium markets in Washington for both new owners and arbitrage operators.
| City/Area | Avg Daily Rate | Occupancy Rate | Avg Annual Revenue | Regulation Level |
|---|---|---|---|---|
| Seattle | $130-$280 | 72-85% | $50,000-$75,000 | Moderate (2-unit cap) |
| Tacoma | $100-$190 | 62-74% | $30,000-$48,000 | Low-Moderate |
| San Juan Islands | $200-$500 | 50-75% | $50,000-$95,000 | High (permit cap + septic) |
| Leavenworth | $180-$380 | 70-85% | $65,000-$100,000 | High (STR cap) |
| Walla Walla | $140-$260 | 55-68% | $35,000-$55,000 | Low |
How Much Do Airbnbs Make in Washington?
Washington’s STR revenue landscape has two distinct tiers. Urban markets (Seattle, Tacoma, Bellingham) deliver consistent year-round income with moderate seasonal variation. Resort and destination markets (San Juan Islands, Leavenworth, Long Beach Peninsula) produce higher peak-season revenue but steeper off-season drops. Your strategy should account for which tier you’re operating in.
Seattle metro (Seattle, Bellevue, Kirkland): $45,000-$75,000 gross annually for a well-managed 2-3 bedroom. The consistency is the key advantage. You won’t see the dramatic summer spikes that island or mountain markets produce, but you also won’t see winter bookings drop below 55-60% occupancy. Business travel fills weekdays. Tourism and events fill weekends.
Tacoma and South Sound: $28,000-$48,000 gross for comparable properties. Lower rates than Seattle, but lower operating costs too. Joint Base Lewis-McChord creates a steady stream of military-related mid-term bookings that can supplement STR income.
San Juan Islands: $50,000-$95,000 gross, with 60-70% of that revenue concentrated in June through September. Waterfront properties with private beaches or dock access can exceed $120,000. The four-month revenue concentration means your cash flow management needs to account for lean winter months.
Leavenworth and Cascade destinations: $55,000-$100,000 gross for permitted properties. Leavenworth’s year-round event calendar creates more balanced revenue than most mountain markets. Ski-season weekends and holiday periods (Thanksgiving, Christmas, New Year’s) produce the highest per-night rates — $400-$600 for a three-bedroom chalet during the Christmas Lighting Festival.
Walla Walla and wine country: $35,000-$55,000 gross. The guest demographic spends lavishly on wine and dining but shops for reasonable accommodation, keeping ADR moderate. Properties styled as “wine country retreats” with outdoor entertaining spaces and proximity to tasting rooms consistently outperform standard residential listings.
Across all Washington markets, the top 10% of hosts earn 2-3 times the market average. The differentiators are consistent: professional photography, 4.9+ star ratings, dynamic pricing that captures event premiums, and listings that tell a compelling story about what makes the location special. Generic “nice clean space” descriptions lose to operators who sell the experience.
How to Start Your Washington Airbnb Business
Step 1: Identify your market and operating model. Washington offers more STR micromarkets than almost any state in the Pacific Northwest. Rental arbitrage works well in Tacoma, Walla Walla, and some Bellingham neighborhoods where lease-to-revenue ratios are favorable. Property ownership makes more sense in permit-capped markets like Leavenworth and the San Juans, where the permit itself becomes a valuable asset. Co-hosting is particularly viable in the San Juan Islands, where many homeowners live off-island and need local management.
Step 2: Confirm your regulatory environment. Search for your specific city and county STR ordinance. In Washington, the county planning department often governs properties outside city limits (relevant for Leavenworth, the San Juans, and rural areas). Confirm permit requirements, any cap or waitlist status, and the total timeline from application to active listing. Some jurisdictions process in two weeks. Others take three months.
Step 3: Register your Washington business. Apply for a Washington State Business License and UBI number through the Department of Revenue — it’s free and takes about 15 minutes online. If forming an LLC, file with the Secretary of State ($200 filing fee, $60 annual renewal). An LLC is strongly recommended for liability protection, especially if you’re operating in markets with outdoor recreation elements (water access, hiking trails, skiing).
Step 4: Lock in your property. For ownership, look for properties with existing STR permits in capped markets — the permit transfers with the property in most Washington jurisdictions. For arbitrage, build a landlord pitch that addresses their top concerns: property damage, noise complaints, and tenant reliability. Offering to name the landlord as additional insured on your STR policy often closes the deal.
Step 5: Handle tax registration. Register with the Washington Department of Revenue for state and local sales tax collection. Set up your account for local lodging tax remittance with the applicable city or county. Confirm which taxes Airbnb collects automatically for your jurisdiction — the platform’s coverage is inconsistent across Washington’s smaller cities.
Step 6: Prepare a property that reflects the location. Washington guests expect properties that connect to their surroundings. A Seattle listing should feel urban and design-forward. A San Juan Islands cabin needs nautical touches and binoculars for whale watching. A Leavenworth property should lean into the mountain aesthetic — wood beams, a real fireplace, quality outdoor seating with mountain views. Invest in amenities that match the activities: kayak storage for waterfront properties, boot dryers for ski market properties, bike repair stands for the San Juans.
Step 7: List, price, and launch. Go live on Airbnb, VRBO, and Booking.com. Washington’s destination markets — especially the San Juans and Leavenworth — perform strongly on VRBO where families book vacation rentals months in advance. Price your first 30 days at 20-25% below market to generate reviews quickly. Washington travelers rely heavily on reviews, so reaching 10 five-star reviews should be your first milestone before raising to full market rate.
Step 8: Systematize and grow. Build a reliable local team: cleaners, a handyman, and (for remote markets) a co-host or property manager who can handle guest issues. Automate messaging, pricing, and turnover coordination. Once your first Washington property runs without daily involvement, evaluate whether to add depth in your current market or diversify into a different Washington micromarket. Explore the best states for Airbnb to decide if Washington should be your primary focus or part of a multi-state portfolio.
Washington STR Insurance and Liability
Washington’s diverse geography creates location-specific insurance challenges. A Seattle apartment has a completely different risk profile than a waterfront cabin on Orcas Island or a ski chalet near Leavenworth. Your insurance coverage needs to reflect where you operate, not just that you operate.
Short-term rental insurance: Standard homeowner’s or renter’s insurance does not cover commercial short-term rental activity in Washington. You need a dedicated STR policy from providers like Proper Insurance, Safely, or CBIZ. Annual premiums in Washington run $1,500-$3,500 per property, with waterfront, island, and mountain properties at the higher end due to increased risk exposure. Policies should cover guest injury, accidental property damage, lost income, and personal liability. Our insurance guide for Airbnb hosts breaks down coverage details.
Earthquake coverage: Washington sits in a seismically active zone. Standard STR policies typically exclude earthquake damage. If your property is in the Seattle metro, Tacoma, or any area west of the Cascades, consider adding an earthquake endorsement. Premiums depend on construction type and proximity to fault lines but typically add $500-$1,500 annually.
Waterfront and marine risks: San Juan Islands and coastal properties face unique risks: storm surge, erosion, dock liability, and guest water activity injuries. Confirm your policy covers these scenarios explicitly. Some insurers exclude dock-related incidents or require a separate marine liability rider.
Wildfire exposure: Eastern Washington and some Cascade-adjacent properties fall within wildfire risk zones. The 2023 Gray Fire near Spokane burned over 10,000 acres and impacted numerous rural properties. Confirm your policy includes wildfire damage without excessive exclusions or deductibles.
Liability minimums: Washington does not set a statewide minimum liability requirement for STR operators, but Seattle requires proof of insurance as part of the license application. Industry standard is $1 million in general liability. Properties with hot tubs, docks, boats, fire pits, or any activity-based amenity should carry $2 million. An umbrella policy ($250-$500/year) is worth it for multi-property operators.
Why 10XBNB Gives You the Edge in Washington
Washington’s STR opportunity is enormous — but so are the pitfalls. Between SB 5576’s new tax authority, Seattle’s evolving enforcement program, the permit caps in Leavenworth and the San Juans, and the sheer complexity of managing a property that might be accessible only by ferry, this market punishes operators who wing it.
10XBNB teaches the systems that successful Washington operators actually use: how to identify which of Washington’s 20+ viable STR micromarkets match your capital and risk profile, how to structure arbitrage agreements that work in university towns like Bellingham or military-adjacent markets like Tacoma, and how to build listings that convert Washington’s experience-driven traveler demographic.
Students operating in Pacific Northwest markets have used the 10XBNB system to negotiate arbitrage leases in Tacoma that cash-flow $2,000+/month in their first quarter, position properties in Leavenworth’s permit queue with applications that get approved on the first submission, and scale from zero to five properties across multiple Washington markets within 12 months. The difference between making $30,000 and $80,000 from the same Washington property usually isn’t the property — it’s the operator’s system.
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Frequently Asked Questions
Does Washington State have income tax on Airbnb earnings?
Washington has no personal income tax, so your Airbnb profits are not taxed at the state income level. However, Washington does impose a Business & Occupation (B&O) tax on gross receipts (1.5% for service businesses at the state level, plus additional city B&O tax in some jurisdictions like Seattle). You must also collect state sales tax (6.5% plus local rates) and any applicable lodging taxes. Federal income tax still applies to your net rental income.
How do I get an STR license in Seattle?
Apply for a Short-Term Rental Operator License through Seattle’s Department of Finance and Administrative Services. The license costs $75 per year. You’ll need to provide proof of liability insurance, designate a 24/7 local contact person, and include your license number on all platform listings. Seattle limits operators to two STR units. The application process typically takes 2-4 weeks. As of 2025, Airbnb verifies Seattle license numbers before activating new listings.
Can I do rental arbitrage in Washington?
Yes. Rental arbitrage is legal in Washington State, provided you have explicit written permission from your landlord and comply with all local STR regulations. The most arbitrage-friendly markets are Tacoma, Walla Walla, and some Bellingham neighborhoods, where lease-to-revenue ratios are favorable. Seattle arbitrage is possible but the higher lease costs ($2,200-$3,500/month for suitable properties) narrow margins. Always secure a lease addendum explicitly authorizing short-term subletting before investing in furnishing.
Are the San Juan Islands worth it for Airbnb investing?
The San Juan Islands offer some of Washington’s highest ADR ($200-$500/night) and strongest brand recognition, but they come with significant barriers: permit caps, septic system requirements, ferry-only access for most properties, and high property prices. Annual gross revenue for a well-managed property ranges from $50,000 to $95,000+, with most revenue concentrated in summer. This is primarily an ownership play — arbitrage is very difficult due to limited rental inventory. If you can acquire a property with an existing permit, the competitive moat is substantial.
What’s the impact of SB 5576 on Washington Airbnb operators?
SB 5576, effective 2025, gave Washington cities and counties new authority to impose excise taxes specifically on short-term rentals. So far, several jurisdictions have added 1-3% surcharges on STR bookings. The practical impact is a modest increase in tax burden that gets passed through to guests via higher nightly rates. The bigger concern is that SB 5576 signals growing regulatory attention on the STR industry — operators should monitor local government activity and participate in public comment periods when new regulations are proposed.
What’s the best market for a first-time Airbnb host in Washington?
Tacoma offers the best combination of moderate regulation, reasonable entry costs, and consistent demand for first-time operators. Lease costs are $1,000-$2,000/month less than Seattle for comparable properties, regulation is straightforward, and proximity to Joint Base Lewis-McChord provides mid-term rental demand that can supplement STR bookings. If you prefer a destination market, Walla Walla’s light regulatory environment and growing wine tourism make it an accessible entry point with upside potential.
