Washington taxes capital gains at 7%. Combined with federal taxes, your effective rate on a home sale could reach 25.8%.
WA State Rate
7%
7% on gains > $250K (since 2022)
Federal Rate
15%
Most common long-term bracket
Combined Effective
25.8%
On $150K taxable gain (example)
After the $250K/$500K exclusion, here's what a typical seller might owe.
If Washington is where your primary residence is located and you've lived there at least 2 of the last 5 years, you can exclude up to $250K (single) or $500K (married filing jointly) of your capital gain from both federal and state taxes.
Investment and rental properties in Washington don't qualify for the exclusion. You'll owe 7% state tax plus federal tax on the full gain, plus 25% depreciation recapture on any depreciation claimed.
In Washington, homes sold in January sell for 11% more than those sold in August (-7%). Timing your sale right can offset a significant portion of your tax bill.
Capital gains tax rates on home sales in Washington and nearby states.
| State | Rate | Tax on $150K Gain | Notes |
|---|---|---|---|
| 5.695% | $8,543 | Flat tax rate | |
WashingtonYou | 7% | $10,500 | 7% on gains > $250K (since 2022) |
| 9.9% | $14,850 | Top marginal rate |
Selling in Idaho instead of Washington would save $1,957 in state tax on a $150K gain.
Washington imposes a 7% tax on capital gains exceeding $250,000 (effective since 2022). Gains below this threshold are not taxed, making it unique among states. This applies per individual, so married couples selling jointly can potentially shelter up to $500K under the federal exclusion before the state threshold applies.
The tax was upheld by the Washington Supreme Court. The $250K threshold is per individual, not per transaction. The first $250K of gains above the federal exclusion is exempt from the state tax.
Seattle's tech-driven market (Amazon, Microsoft, Meta) has created significant appreciation. Many long-term homeowners have gains that trigger the 7% state tax after the federal exclusion.
Washington has no general income tax. The capital gains tax is structured as an excise tax on the sale of certain assets. Real estate can be partially shielded if it qualifies as a principal residence with the federal exclusion.
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