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Capital Gains Tax in Washington
By Priya Raman
No general income tax, but Washington's separate gains tax has its own rules worth knowing.
No general income tax, but Washington's separate gains tax has its own rules worth knowing.
Washington has no general personal income tax, so most real estate sellers here answer to the federal government alone. But the state does run a separate capital gains tax on certain assets above an annual threshold, and it's worth understanding how that interacts with a property sale before assuming the federal 23.8% is the whole story.
For most investment property sales, the applicable rate is federal only: up to 23.8%, combining the 20% long-term rate with the 3.8% NIIT. Washington's standalone capital gains tax applies above roughly $262,000 in gains annually and excludes real property sold through a 1031 exchange, so it rarely touches a straightforward property sale.
Apply the 23.8% federal ceiling to a hypothetical $250,000 gain and the number lands around $59,500, assuming the sale falls outside Washington's separate state gains tax. Real liability depends on income, basis, and whether other assets push a seller over that state's threshold.
A 1031 exchange defers the federal portion and, because real property sold through a qualifying exchange is excluded from Washington's state capital gains tax, keeps that state exposure off the table too. Work through the numbers in the 1031 exchange calculator and track your 45- and 180-day deadlines with the timeline calculator.