The Washington State Supreme Court has ruled that the excise tax on capital gains is constitutional and valid. As such, the Department of Revenue will continue collecting the tax which is due April 18, 2023.
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Only individuals owing capital gains tax are required to file a capital gains tax return, along with a copy of their federal tax return for the same taxable year. The capital gains tax return is due at the same time as the individual's federal income tax return is due. Individuals who receive a filing extension for their federal income tax return are entitled to the same filing extension for their capital gains tax return. However, a filing extension does not extend the due date for paying the capital gains tax due.
Penalties will apply to late returns. Additional penalties and interest will apply to late payments.
If you have general questions regarding Capital Gains or would like to request a binding ruling, please use our web page titled Request a tax ruling.
The 2021 Washington State Legislature recently passed ESSB 5096 (RCW 82.87) which creates a 7% tax on the sale or exchange of long-term capital assets such as stocks, bonds, business interests, or other investments and tangible assets.
This tax only applies to individuals. However, individuals can be liable for the tax because of their ownership interest in a pass-through or disregarded entity that sells or exchanges long-term capital assets. The tax only applies to gains allocated to Washington state.
There are several deductions and exemptions available that may reduce the taxable amount of long-term gains, including an annual standard deduction of $250,000 per individual. In the case of spouses or domestic partners, the combined standard deduction is limited to $250,000 whether they file joint or separate returns.
The tax takes effect on Jan. 1, 2022, and the first payments are due on or before April 18, 2023.
The revenue collected from this tax will fund the education legacy trust account and common school construction account.
The sale or exchange of the following assets are exempt from the Washington capital gains tax:
The following deductions apply:
The following tax credits are available: