Washington State Capital Gains Tax: 2026 Rates & Exemptions

Last updated: September 20, 2026.

Washington State’s capital gains tax applies to certain net long-term gains allocated to Washington, including gains on stocks and business interests. The rate is 7% on the first $1 million of taxable Washington capital gains and 9.9% above that amount, after applicable deductions. It taxes gain, not the full sale proceeds. Direct real-estate sales and assets held in qualifying retirement accounts are exempt.

Do You Owe Washington Capital Gains Tax?

1. Identify the gain. Start with federal net long-term capital gain, then apply Washington’s adjustments and exemptions. Short-term gains and ordinary income are outside this excise tax.
2. Check Washington allocation. For stock and other intangible property, domicile at the time of sale controls. Tangible personal property follows separate location and residency rules under RCW 82.87.100.
3. Apply deductions, then rates. The standard deduction is $278,000 for tax year 2025; use the published deduction for the year of your sale. The $1 million rate breakpoint applies after deductions. If no taxable Washington capital gains remain, no tax is due.

For a sale in 2026, use the deduction published for that tax year. The table below distinguishes confirmed figures from amounts awaiting DOR publication.

What Is the Washington State Capital Gains Tax?

Washington's capital gains tax is a standalone excise tax on long-term capital gains realized by individual taxpayers. The tax was enacted in 2021, took effect in January 2022, and was upheld by the Washington Supreme Court in Quinn v. State, 1 Wn.3d 453, 526 P.3d 1 (2023). The U.S. Supreme Court denied certiorari in January 2024. The tax is structured as an excise — a tax on the privilege of selling assets — rather than as a tax on income, a structural choice the legislature made to avoid the constitutional uniformity-clause problem that has historically defeated Washington income tax proposals.

Is There a 2.9% Capital Gains Tax in Washington?

Yes — as a surcharge on top of the 7% base. Under ESSB 5813, taxable Washington capital gains above $1 million after deductions face an additional 2.9% (combined 9.9%). Details and the deduction table are in Rates and Thresholds below.

Rates and Thresholds (2026)

Using the full published 2025 standard deduction of $278,000 and no other deductions, the 9.9% tier begins above $1,278,000 of Washington-allocated nonexempt gain. Use the deduction for the year of your sale.

The 9.9% tier was added by ESSB 5813, signed by Governor Ferguson on May 20, 2025, retroactive to January 1, 2025.

Note: This 9.9% capital-gains tier is part of the existing capital-gains excise tax. It is separate from the new 9.9% income tax (ESSB 6346) scheduled to take effect January 1, 2028, and the two taxes are governed by different statutory frameworks even though they share a rate.

Three Exit Examples

These illustrations use the published 2025 deduction of $278,000, a single filer, long-term gains, no other deductions or credits, and no exemption unless stated. Confirm the applicable deduction for the actual sale year.

• A $750,000 gain. Subtract the $278,000 deduction, leaving $472,000 — all in the 7% band. Tax: about $33,040.
• A $2,000,000 gain. Subtract the $278,000 deduction, leaving $1,722,000. The 7% base rate applies to all of it ($120,540); the 2.9% surtax applies to the $722,000 above $1,000,000 ($20,938). Total tax: about $141,478.
• A $5,000,000 gain, with and without QSBS. Without an exclusion, subtract $278,000, leaving $4,722,000: $1,000,000 × 7% + $3,722,000 × 9.9% = $438,478. If the entire $5,000,000 qualifies for the federal Section 1202 exclusion, Washington capital gains tax is $0. See the QSBS section below.

Who Pays the Tax?

The tax is imposed on individuals, not on corporations or LLCs directly. Pass-through gains, however, flow to the owners and count toward each owner's threshold. For Washington capital-gains tax purposes, spouses and state-registered domestic partners generally are treated as one taxpayer for thresholds, caps, deductions, and credits, even if they file separate returns. Their activities and assets are combined under RCW 82.87.120(4). Filing separately does not create two separate $1 million capital-gains rate bands.

What Gains Are Subject to the Tax?

Long-term capital gains from the sale or exchange of:

• Stocks, bonds, and other securities
• Business interests (LLC interests, partnership interests, S-corp stock)
• Tangible personal property, including appreciated investment property and personal-use property, subject to allocation rules and exemptions

Personal-use property can produce taxable gain even though a loss on personal-use property generally is not deductible. For art and collector cars, location and residency also matter. See the collection-sale planning guide.

What Gains Are Exempt?

Chapter 82.87 RCW reaches only long-term capital gain. Every carve-out below sits inside a base that already excludes short-term gain and ordinary income.

• Real estate — direct transfers of real property are exempt under RCW 82.87.050(1). On the sale of an interest in a privately held entity, the gain is exempt only to the extent it is directly attributable to real estate the entity owns directly (RCW 82.87.050(2)); the rest of the gain is taxable
• Retirement accounts — assets held in IRAs, 401(k)s, and similar retirement savings accounts (RCW 82.87.050(3))
• Depreciable business property — property depreciable under IRC §167(a)(1) or eligible for §179 expensing (RCW 82.87.050(6)), the exemption that keeps equipment and other depreciable assets in an asset sale outside the tax
• Condemnation — assets sold under, or under imminent threat of, condemnation proceedings (RCW 82.87.050(4))
• Livestock, timber, and fishing privileges — cattle, horses, or breeding livestock where more than 50% of the taxpayer's gross income for the year is from farming or ranching (RCW 82.87.050(5)); timber, timberland, and timber-derived REIT distributions (RCW 82.87.050(7)); commercial fishing privileges (RCW 82.87.050(8))
• Auto dealership goodwill — goodwill from the sale of a licensed auto dealership (RCW 82.87.050(9))
• Family-owned small business sales meeting specific conditions — technically a deduction under RCW 82.87.060(3), defined at RCW 82.87.070, rather than an exemption
• QSBS gains excluded under federal Section 1202 (see below)

These exemptions also protect exempt long-term gains from the 2028 income tax. Short-term gain and ordinary income, including ordinary-income recapture, require separate analysis. How the two regimes interact.

Do I Pay Capital Gains Tax If I Sell My House in Washington State?

Generally, no. Gains from the direct sale of real property — your home, a rental, raw land you hold directly — are exempt from Washington's capital gains tax. The tax targets gains on financial assets and business interests, not real estate.

The exemption for an LLC or partnership interest covers only gain directly attributable to real estate the entity owns directly. Goodwill and other non-exempt assets remain subject to the tax. Real estate held through a lower-tier entity is excluded from this exemption calculation under RCW 82.87.050(2)(b)(iii). Dealers holding property as inventory recognize ordinary income, outside this capital gains tax.

The 2028 income tax also excludes exempt long-term real-estate gains. Short-term gains and ordinary income, including dealer income and ordinary-income recapture, require separate modeling.

QSBS and Washington's Capital Gains Tax

The portion of a stock gain excluded under Section 1202 is outside Washington’s capital-gains tax base. The transaction is still reported on the federal return: IRS Form 8949 instructions direct taxpayers to report the sale and enter the exclusion as an adjustment. Washington starts with federal net long-term capital gain after that exclusion. Any unexcluded portion requires its own Washington calculation.

Document the qualification analysis before the sale. A QSBS attestation letter can support the gross-assets, active-business, and redemption analysis; it does not replace the underlying records.

SB 6229 in the 2026 session proposed adding federally excluded QSBS gains to the Washington capital gains tax base. It did not pass. The official bill history records a January 27 public hearing and a February 19 executive session at which no action was taken.

→ Full guide: QSBS & Washington Taxes — A Start Here Guide

How to Reduce or Avoid the Washington State Capital Gains Tax

The right strategy depends on your assets, timeline, and circumstances. Most require action before a sale:

Review QSBS qualification before a sale. Use the QSBS guide to assess eligibility and the available exclusion. Preserve supporting records, consider a QSBS attestation letter, and review changes in the company’s assets and activities during the holding period.

Change your domicile before you sell. For stock and other intangibles, domicile at the time of sale controls Washington allocation. A move must change where you actually make your permanent home; day counts alone are insufficient. See the residency section below.

Use the real-estate exemption and the family-business deduction. Direct real property sales are exempt under RCW 82.87.050, and gain on a qualifying family-owned small business can be deducted under RCW 82.87.070. Structuring a transaction to fit within an exemption is legitimate; assuming an exemption applies without confirming the conditions is where people get hurt.

Claim the B&O credit if the same sale bears both taxes. Where a single sale or exchange is subject to both Washington's business and occupation (B&O) tax and the capital gains tax, a credit prevents the same transaction from bearing both in full. Starting with tax year 2025, the credit runs against the capital gains tax: per DOR guidance, you may credit the B&O tax paid on the same sale or exchange against your capital gains liability. (For tax years 2022–2024, the credit ran the other direction — a B&O credit for capital gains tax due — and that version expired December 31, 2025.) This matters mainly for sales of business interests or assets where the transaction itself bears B&O tax; ordinary stock sales typically do not.

Time the gain. The $1 million threshold and the standard deduction reset each year. Separate sales in different tax years can spread gain across those years. An eligible private-company stock sale may also qualify for installment reporting, but stock or securities traded on an established securities market cannot: gain must be reported in the year of the trade date. Delaying payment does not change that rule. See IRS Publication 537. Model the recognition years together with the 2028 income-tax calculation below.

Give appreciated assets to charity — carefully. A properly completed gift of appreciated stock before gain is attributable to you can avoid recognition of that gain. The separate Washington charitable deduction has its own eligibility rules, donation threshold, and cap. A DAF sponsor’s failure to qualify for that deduction does not by itself determine whether you recognize gain on donated stock (see below). Charitable remainder trusts and similar structures are also worth modeling for very large gains.

Gifting and trust planning. A gift or trust transfer does not automatically remove gain from your Washington return. RCW 82.87.040 treats grantor-trust assets as beneficially owned by the grantor and applies a similar rule to incomplete-gift nongrantor trusts. Review the recipient’s tax position, gift completeness, federal ownership, and Washington allocation before relying on a transfer. Coordinate the income-tax analysis with estate planning.

No strategy fits every transaction. Confirm the conditions and coordinate the steps before committing to a sale.

Residency Planning: Can You Move to Avoid the Tax?

For a founder considering a move, two tests matter:

1. Domicile — a fact-driven inquiry into where you actually live, intend to remain, and treat as your permanent home. For stock and other intangibles this is the test that matters: RCW 82.87.100(1)(b) allocates the gain to Washington if you were domiciled in the state at the time of the sale or exchange.
2. Statutory residency — maintaining a place of abode in Washington and being physically present in the state more than 183 days in the year (RCW 82.87.020). Residency status is one element of the tangible-property allocation rules under RCW 82.87.100(1)(a) (alongside where the property was located), and, alongside domicile, defines a resident for the 2028 income tax. By itself it does not reach a stock sale.

Day counts do not decide domicile. A founder who keeps a Washington home and spends most of the year here will have a hard time showing that domicile moved, so the practical plan changes both. Late-stage relocations — moves attempted in the weeks before closing — stand or fall on the documented facts of domicile.

→ Full guide: Residency Planning Before You Sell

The Charitable Deduction Has a Hidden Catch

Washington's capital gains tax includes a charitable deduction under RCW 82.87.080 — but only for donations to "qualified organizations" that are eligible under IRC §170(c) and are principally directed and managed within Washington. This is not a standard federal charitable deduction rule. It matters most for donor-advised funds: in Washington, the relevant organization is the DAF sponsor (Fidelity, Vanguard, Schwab, etc.), not the ultimate charity — and the major national DAF sponsors are not Washington organizations.

→ Full guide: Washington Capital Gains Tax Charitable Deduction

How and When to File and Pay

The Washington capital gains tax return is separate from your federal return. Electronic filing is generally required through the Washington DOR’s My DOR portal (or another DOR-authorized method). Include your federal return and the forms, schedules, and supporting documents directly related to net long-term capital gain; DOR may request additional information under RCW 82.87.110.

• Payment must be electronic — by electronic funds transfer or another DOR-authorized method such as credit card. DOR may waive electronic filing or payment for good cause under RCW 82.87.110.
• Due date. For 2025 gains, DOR extended returns and payments to May 1, 2026 for all filers. For 2026 gains, the scheduled deadline is April 15, 2027. If a deadline has passed, check any valid extension or disaster relief and address unpaid tax promptly. See also the WA DOR capital gains hub.
• Extensions don't extend payment. A timely obtained Washington filing extension, supported by a federal extension, allows filing the 2025 return by October 15, 2026. It did not extend the payment deadline.

Prepayment opens October 15, 2026. Under HB 1376 (Chapter 191, Laws of 2026), DOR will accept prepayments for 2026 gains through My DOR, up to six months before the April 15, 2027 deadline (see DOR FAQ and the prepayment special notice). Review federal deduction timing separately before prepaying for that purpose.

Disaster-relief note for 2025 returns: The IRS later postponed the federal deadline to August 5, 2026 for covered taxpayers. RCW 82.87.110(1) provides an argument for corresponding Washington relief. As of September 20, 2026, I have not found published DOR guidance confirming a corresponding postponement of Washington’s capital-gains filing and payment deadlines. If you filed or paid after May 1, discuss relief with your advisor before conceding penalties.

The Tax Stack: What Happens in 2028

On January 1, 2028, Washington's enacted 9.9% income tax is scheduled to begin. It applies above a $1 million standard deduction, shared by married couples and registered domestic partners, and reaches ordinary income as well as certain gains. A capital gains tax credit prevents simply adding the two tax bills together.

For illustration, hold the capital gains deduction at the published 2025 amount of $278,000; actual 2028 figures will differ. Assume a single Washington resident, a $5 million fully taxable long-term gain, and no other deductions or credits.

With no other income, capital gains tax is $438,478 and income tax before the credit is $396,000. The credit reduces income tax to zero.

With $2 million of ordinary income as well, income tax before the credit becomes $594,000; subtracting the $438,478 capital gains tax leaves $155,522 of income tax. Combined Washington tax: $594,000.

The mechanics are in ESSB 6346 §302 (capital-gain adjustments) and §205 (the credit). Model your gain together with ordinary income, then compare closing before 2028 with spreading recognition across years. Full mechanics: Washington Capital Gains Tax vs. the New 9.9% Income Tax.

Status checked September 17, 2026: the separate income tax remains enacted for 2028, with repeal and constitutional litigation pending. Initiative 645 does not expressly repeal chapter 82.87. Its broader prohibition on taxes measured by individual income requires separate statutory analysis. Follow the Initiative 645 tracker for procedural developments.

→ Full guide: Washington's 9.9% Income Tax (ESSB 6346)

Frequently Asked Questions

What is the Washington State capital gains tax rate? After deductions, the rate is 7% on the first $1 million of taxable Washington gain. Above that amount, a 2.9% surcharge produces the 9.9% top tier. See Rates and Thresholds for the applicable deduction.

How much is Washington’s capital gains tax on a $300,000 gain? Using the 2025 deduction, ($300,000 − $278,000) × 7% = $1,540, assuming the full deduction is available and no exemption applies. Use the deduction for your sale year.

When is the Washington capital gains tax due? For 2026 gains, the scheduled deadline is April 15, 2027. For 2025 gains, DOR announced May 1, 2026; a timely obtained filing extension runs to October 15, 2026 but did not defer payment. See How and When to File and Pay for the disaster-relief note.

What form do I use to file the Washington capital gains tax? File electronically through My DOR or approved software, attaching your federal return and supporting documentation. Payment must also be electronic.

Are QSBS gains subject to Washington’s capital gains tax? The portion excluded federally under Section 1202 is outside the Washington capital gains tax base under current law. Any unexcluded portion needs its own calculation. See the QSBS section above.

Can I avoid Washington's capital gains tax by moving out of state? Possibly. For stock and other intangibles, domicile at the time of sale controls. A documented change of permanent home must precede the sale; day counts alone do not establish it. See Residency Planning above.

Have questions about your specific situation?

Joe Wallin is a startup and tax attorney with 25+ years of experience advising founders and investors on Washington tax planning, QSBS, and equity compensation. Book a free 20-minute call to discuss your situation.

This post is general information about Washington tax law, not legal or tax advice. Every situation is different — consult a qualified advisor before acting.