I would take the tile all the way up to the ceiling (and down to the floor, too). Have you considered raising the upper cabinet to the ceiling? If you did that —and added a shelf below it for frequently used items— you’d not only increase your storage space but you’d eliminate the issue of having to tile the awkward space above the cabinet! You could also add more lighting to the space via undercabinet lighting, and, perhaps, wall sconces. It looks awfully dark in there and laundry, like cooking, really benefits from good task lighting. Will you be removing the existing partial-height backsplash?

We need pictures.

Are you planning to move the washer and dryer out while you paint? I just painted my laundry room and kitchen with rustoleum and found it really needed an extended drying period after the clear coat. Anticipate that. I did a test coat in the tiny laundry room first and gave it 24 hours, but that was insufficient I redid everything just before we left out of town on the Thursday before President’s Day returning late Monday and that was solid. The Rustoleum product was hard to get — I had to order it and the hardware store struggled to match the black they mixed the time before. All that said, I like it a lot better than what was there and I didn’t add waste to the local landfill. Were I to have had the tile removed, the contractor claimed he’d have to replace the subfloor (old house) and I was not in the mood for that.

Tile up to the bottom of your upper cupboard and down to the counters. Because the the laundry room is usually fairly small and enclosed, it's an opportunity for the colour and exuberance that is often avoided in more public areas of the home. The décor should help make your laundry experience more pleasant. Right now, I don't think it does. Choose a tile that you like. Then choose a paint colour for the walls that goes with that tile and makes you happy. Add some art. When I did my 12x7 laundry room, I painted it lime green. Bright? Absolutely! But it makes me smile every time I go in there. Lime green definitely isn't for everyone. But maybe a soft blue or a cheerful yellow?