Washington State Capital Gains Tax

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by

Alyse Clark
in

I don’t share my opinion on any government policy. I only report how any new policy may be relevant to investors.

Before 2022, Washingtonians only paid federal long-term capital gains tax. Washington state first implemented its own capital gains tax in 2022. The tax applies to profits from the sale of stocks, bonds, and other non-retirement assets while exempting real estate, retirement accounts, and many small business sales.

Between 2022 and 2024, the first $270,000 in capital gains per year were exempt from State tax. All long-term capital gains above the $270,000 exemption were taxed at 7% in addition to Federal tax. New changes have been made to the Washington State capital gains tax, effective retroactively as of January 1, 2025. In 2025, the state’s long-term capital gains tax rates are as follows.

  • Capital gains in the amount of $1-$270,000 are exempt from state tax and only subject to Federal tax
  • Capital gains between $271,000 – $1,270,000 are taxed at 7% state tax in addition to Federal tax.
  • Capital gains of $1,271,000 and above are taxed at 9.9% state tax in addition to Federal tax.

After Washington’s state income tax was first implemented in 2022, it was challenged in court as unconstitutional. The State Supreme Court upheld the tax in 2023, and the U.S. Supreme Court declined to hear an appeal.

Affected taxpayers will need to account for the higher rate when filing their 2025 returns in April 2026.

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Alyse Clark is a registered investment adviser in the State of Washington. The Adviser may not transact business in states where she is not appropriately registered, excluded, or exempted from registration. Individualized responses to persons that involve either the effecting of transactions in securities or the rendering of personalized investment advice for compensation will not be made without registration or exemption. The opinions expressed herein are those of the firm and are subject to change without notice. Any projections or forward-looking statements expressed herein are solely those of the author and may differ from the views or opinions expressed by other firms and are only for general informational purposes as of the date indicated. Past performance of information presented should not be relied upon without knowledge of certain circumstances of market events, the nature and timing of the investments, and relevant constraints of the
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