Washington Capital Gains Tax: What You'll Actually Owe
Washington's capital gains tax works differently from every other state, and the difference is worth real money if you plan around it.
Washington capital gains tax calculator
Enter your sale and see the 2026 tax in Washington: federal capital gains tax, the 3.8% net investment income tax and Washington state tax, then the same sale spread over the years the buyer pays you. It runs on the same engine as our capital gains tax calculator, in your browser. Rental property, your home, land, a business, stock or collectibles.
You keep $2,947,955 after selling costs and tax. The tax is 28.4% of your gain.
Your gain
- Sale price less selling costs$3,880,000
- Less your basis$600,000
- Your taxable gain$3,280,000
- Long-term gain at 0%, 15% or 20%$3,280,000
The tax, line by line
- Federal income tax (incl. $27,642 AMT)$663,847
- Net investment income tax (3.8%)$0
- Washington tax$268,198
- Total tax$932,045
- You keep$2,947,955
Get the REAL numbers
Talk to capital gains expert Hans Goldstein, EA.
These are estimates. Have a qualified tax professional run your real numbers in a 15-minute scope call.
Why now: the year you close and how the buyer pays you are set before closing, and they decide how much of this Washington tax you keep.
Book my 15-minute callThis is an estimate. Getting it right down to the tee takes your actual tax forms (returns, K-1s, depreciation schedules), a consult and a paid analysis. The first 15-minute scope call is free.
Worked example (computed October 13, 2026)
A married couple in Washington sells the stock of their company for $4,000,000 with $120,000 of deal costs and a $600,000 basis; other income is $250,000. The gain is $3,280,000. All in one year the tax is $932,045: $663,847 federal, $0 net investment income tax and $268,198 Washington tax, or 28.4% of the gain. Spread over 10 years on a note, the tax on the gain is $529,620, so they keep $402,425 more (interest on the note is taxed separately).
What a Washington seller actually pays
federal capital gains tax (0%, 15% or 20%) plus the 3.8% net investment income tax; on stock, business interests and other non real estate assets the 7% excise above the deduction (9.9% on the part over $1,000,000); on real estate no capital gains excise, but the seller usually pays the real estate excise tax of 1.1% to 3.0% of the price (state graduated rates, thresholds $525,000, $1,525,000 and $3,025,000 through 2026, RCW 82.45.060) plus local REET.
What is the tax bill on your Washington sale going to be?
Send me the sale price and rough basis. Within one business day I'll email you the actual number and the Seller's Guide to §453. If it doesn't fit your deal, I'll tell you that plainly.
No retainer · no obligation. Hans Goldstein, a licensed insurance agent (CA Insurance License #4273294), will contact you and may discuss insurance products, including annuities.
Go deeper: Washington capital gains tax on a business, real estate or farm sale (2026) on Big Sale Tax.
How Washington treats capital gains
Washington has no general income tax, but since 2022 it levies a 7% excise tax on long-term capital gains above an annual standard deduction of $278,000 for 2025 (indexed each year), plus an additional 2.9% on taxable gains above $1 million from 2025. Real estate is excluded.
Because the tax applies only above an annual threshold, spreading a gain across years can drop each year below it and eliminate the state tax entirely. That is an unusually clean planning outcome.
The three layers on a Washington sale
Most sellers budget for one tax and get hit with four:
- Federal long-term capital gains at 0%, 15% or 20% depending on total taxable income for the year.
- Net investment income tax of 3.8% once modified AGI passes $200,000 single or $250,000 married filing jointly. Those thresholds are not indexed for inflation, so more sellers cross them every year.
- Depreciation recapture, if the asset was a rental or business property. The real-property portion is taxed at up to 25% as unrecaptured Section 1250 gain, and equipment is recaptured as ordinary income. See depreciation recapture.
- Washington state tax of 7.0% on long-term gains above the $278,000 annual standard deduction (2025, indexed), and 9.9% on taxable gains above $1 million. Real estate is excluded.
The result on a large sale is around 30.8% on gains above the threshold and 33.7% on taxable gains above $1 million.
Why the year matters more than the rate
Every one of those layers is triggered by income landing in a single tax year. The federal rate steps from 0% to 15% to 20% based on taxable income. The 3.8% surtax switches on at a fixed threshold. For sellers 65 and older, the new $6,000 senior deduction begins phasing out at $75,000 of modified AGI ($150,000 joint) and is fully gone by roughly $175,000 ($250,000 joint), so a single large sale wipes it out completely.
Spreading the same gain across several years keeps each year's income lower, and each layer is calculated on that lower number. That is the entire mechanism behind an installment sale under IRC §453, and it is why two sellers with identical gains can pay very different totals.
Recapture is the exception: under §453(i) it is recognized in the year of sale regardless of how payments are structured.
What this actually costs: Washington numbers
Take a $500,000 long-term gain, on top of $200,000 of other income, married filing jointly.
That is roughly 27% of the gain. But Washington's tax applies only above the annual threshold, so the state portion is not inevitable. It depends entirely on how much gain lands in one year.
If the asset was ever a rental or business property, add depreciation recapture: up to 25% on the real-property portion and ordinary rates on equipment.
The four layers, in the order they hit you
1. Federal capital gains. 0%, 15% or 20%, decided by your total taxable income for the year, including the gain itself. That is why one large sale lands people in the 20% bracket who normally sit far below it.
2. The 3.8% net investment income tax. Switches on above $200,000 modified AGI single, $250,000 married filing jointly. Those thresholds have never been indexed for inflation, so each year quietly captures more sellers.
3. Depreciation recapture. Only if you depreciated the asset. The real-property portion is unrecaptured Section 1250 gain at up to 25%; equipment is Section 1245 recapture at ordinary rates. The §1245 piece cannot be spread: §453(i) puts it in the year of sale. Unrecaptured §1250 gain on a building is spread with the payments.
4. Washington tax. of 7.0% on long-term gains above the $278,000 annual standard deduction (2025, indexed), and 9.9% on taxable gains above $1 million. Real estate is excluded.
Who Washington can tax, and on what
- Real estate is outside this tax. Washington's capital gains excise tax does not apply to sales of real estate. If you live in another state with an income tax, that state generally taxes your gain on Washington property.
- Everything else generally follows residency on the date of sale: business interests, stock, collectibles.
Washington does not withhold at closing, and the excise tax is self-reported with your annual return. Sellers miss it constantly because nothing at closing reminds them.
Does spreading the sale help in Washington?
More than almost anywhere else. The excise tax applies only to gains above the $278,000 annual standard deduction. Split a $500,000 gain across two years and each year's $250,000 falls under it. That does not reduce the state tax, it eliminates it. Worth $15,540 here.
An installment sale under IRC §453 spreads the gain across the years you actually receive payments, so every threshold above is tested annually instead of once.
The trade-offs deserve stating plainly: you need a buyer willing to pay over time, you carry collection risk, recapture still lands in year one, and large installment balances can trigger an interest charge under §453A. It fits some sales and not others, which is exactly what a conversation before closing is for.
Find out what your sale is really going to cost you in tax, and what you can do about it
No retainer. On a funded structure, the insurer pays a one-time commission of about 4% of the amount structured to the brokerage firm that places it (Hans’s share is about 2.4%; no trail). It is built into the annuity pricing, not a separate fee.
Find out what your tax bill actually looks like before you sell, including the parts your CPA may not raise until the return is already being prepared.
Most people find out what they owe after the sale closes, when nothing can be changed. A short conversation now tells you the number, which layers apply to your situation, and which options are still open while the sale is still in front of you.
- What you will actually owe: federal, the 3.8% surtax, recapture and your state
- Which of those layers you can still do something about
- Whether spreading the sale changes the number in your case
Hans Goldstein · 213-414-2808 · Hans Goldstein: Tax & Exit Planning · This is an educational conversation, not tax advice. Bring your CPA in before you file.
Hans Goldstein, a licensed insurance agent (CA Insurance License #4273294), will contact you and may discuss insurance products, including annuities.
Selling a house in Washington: what you'll actually owe
Washington does have a capital gains tax. It is an excise tax of 7% on long-term gains from assets such as stocks, bonds, business interests, and other investments. Since January 1, 2025, an additional 2.9% applies to the portion of Washington capital gains above $1,000,000, so that slice is taxed at 9.9% in total.
The house itself is exempt. State law exempts all real estate transferred by deed, real estate contract, or other recorded instrument that transfers title, including land, fixtures, and used mobile and floating homes. A typical home sale gain is outside the capital gains tax entirely.
Selling an LLC or partnership interest is different. If the asset sold is an interest in a privately held entity, the exemption covers only the gain directly attributable to real estate the entity owns directly. Gain tied to other entity assets can still fall within the 7% tax.
The standard deduction. Gains up to an inflation-adjusted standard deduction are not taxed. The figure was $250,000 for 2022, $262,000 for 2023, $270,000 for 2024, and $278,000 for 2025. Spouses and domestic partners share one deduction. The 2026 amount was not yet posted at the time of writing.
Installment sales of non-real-estate assets. For sales on or after January 1, 2022, gain counts toward the Washington tax in the same manner it is reportable for federal purposes. If the gain is reported on the federal installment method, it would generally be counted in Washington in the same years. Sales closed before January 1, 2022 are not subject to the tax, even when payments arrive later.
What a home seller does pay: REET. The real estate excise tax applies to the sale price, not the gain. The seller usually pays it; otherwise the buyer is responsible. For sales from January 1, 2023 through December 31, 2026, the state rates apply by tier:
- 1.10% on the portion up to $525,000
- 1.28% on the portion from $525,000.01 to $1,525,000
- 2.75% on the portion from $1,525,000.01 to $3,025,000
- 3% on the portion above $3,025,000
Starting January 1, 2027, the tiers shift to $551,000, $1,551,000, and $3,051,000. Qualifying agricultural and timberland sales pay a flat 1.28%. Local REET is added on top; most cities and counties charge 0.25% or 0.50%, and a few charge more. REET can also apply when 50% or more of an entity that owns Washington real property changes hands.
Common mistakes.
- Assuming Washington has no capital gains tax. It does, on stocks, business interests, and similar assets.
- Assuming that tax reaches a house sale. Real estate is exempt; REET is the tax that applies.
- Assuming an LLC interest is fully exempt. Only the real estate portion is.
- Forgetting that REET is figured on the sale price, not the profit.
Rules and figures change; verify with a CPA or the Washington Department of Revenue at dor.wa.gov before relying on them.
Worked example: a Washington home sale in 2026
Assumptions: married filing jointly, a home bought for $400,000 including improvements and sold for $1,200,000, lived in for at least 2 of the last 5 years. The $800,000 gain minus the $500,000 exclusion leaves $300,000 of taxable long-term gain, on top of $150,000 of other taxable income.
Washington's capital gains excise tax does not apply to real estate, so the state income line is zero. The seller would still owe state REET on the sale price: $14,415 on $1,200,000 at the state tiers (1.10% to $525,000, 1.28% above), plus any local REET. This is arithmetic on stated assumptions, not a projection of anyone's actual bill. For how the exclusion works when the gain runs past it, see capital gains on a home sale over the exclusion.
Frequently asked
Q: What is the Washington capital gains tax rate? A: 7.0% on long-term capital gains above an annual standard deduction of $278,000 for 2025 (indexed each year), plus 2.9% more on taxable gains above $1 million. Real estate sales are excluded from the tax.
Q: Does Washington have a lower rate for long-term capital gains? A: Washington taxes only long-term gains, and only above the annual threshold. Short-term gains are not subject to the excise tax.
Q: How do I calculate capital gains tax in Washington? A: Start with your sale price minus your adjusted cost basis, which is what you paid plus improvements minus any depreciation you took. That gain is then subject to federal capital gains rates, potentially the 3.8% net investment income tax, depreciation recapture if it was a rental, and Washington tax. The calculator on this site layers all four.
Q: Can I avoid Washington capital gains tax by moving before I sell? A: Residency changes are scrutinised closely and the facts matter a great deal, including where you lived at closing and whether the asset is real property physically located in the state. Real estate is generally taxed by the state where it sits regardless of where you live. Talk to a CPA before relying on this.
Selling something specific in Washington?
- Selling real estate in Washington
- Selling a business in Washington
- Selling a mobile home park in Washington
- Selling a self-storage facility in Washington
- Selling a dental practice in Washington
- Selling a veterinary practice in Washington
- Selling a SaaS business in Washington
- Selling an insurance book of business in Washington
Run your specific numbers
The calculator runs your sale through real 2026 federal + state tax brackets and shows §453 savings vs lump sum side-by-side.
Run the calculator → 213-414-2808