It’s officially here! In 2021 the Washington State Legislature passed ESSB 5096 which created a 7% excise tax on the sale or exchange of long-term capital assets such as stocks, bonds, business interests, or other investments. This law was immediately challenged and the legislation had been tied up in the courts ever since. In March of this year, the Washington State Supreme Court ruled that the state’s capital gains tax is constitutional and valid. The tax became effective beginning on January 1, 2022. Yes, that means eligible filers may have to file and pay taxes on transactions completed last year.
However, before your panic, there are a few details to consider:
- The tax on gains applies to profits from sales in excess of $250,000 per individual or couple.
- This tax only applies to individuals; trust accounts do not count.
- Real estate gains are not included in the new tax.
In other words, unless you sold investments with gains of over $250,000 this tax does not apply to you. Details around the implementation of this law are still emerging but as of now filing and payment must be done electronically with the state through a SAW account. Late filing and payment penalties do apply. It is still unclear on whether this state tax will be deductible on your Federal Tax Return.
The bottom line is: if you have engaged in a sale that might qualify for this tax it makes sense to consult a tax professional regarding your liability. And moving forward, you’ll want to consider the impact of this tax on future transactions.
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