Washington State Capital Gains Tax Update & Initiative 2109
Thursday, May 9, 2024
It has now been over a year since the Washington Supreme Court upheld a law instituting a 7% tax on capital gains (i.e. profits) from the sale of assets (with some exceptions) exceeding $250,000. See our prior post here for details.
Fast forward and Washington’s new capital gains tax has brought in nearly $900 million in its first year (2023), according to the Washington Department of Revenue. The first $500 million of the tax is directed toward a state fund that pays for K-12 education and child-care programs. The additional dollars are then expected to go into a state account that pays for school construction.
Fast forward again and a measure (I-2109) has been placed on the November 2024 ballot for Washington voters giving them the opportunity to repeal the capital gains tax.
It’s been an interesting endeavor up to this point and it would appear the journey has more in store. We will await the outcome in November and update accordingly.
In the interim, here are some important takeaways to consider:
- As noted in our prior post on this topic, short-term losses cannot be used to offset long-term capital gains that are subject to the Washington capital gains tax. This has created a notable challenge for those using some rather popular tax optimization strategies that tend to generate mostly short-term losses.
- Losses from a sale or exchange that occurred before the law’s effective date of January 1, 2022, cannot be used to reduce your Washington capital gains tax.
- The standard deduction amount (the amount of gain excluded from this tax) is adjusted for inflation annually. In 2022 the standard deduction was $250,000 per year per individual, married couple, or domestic partnership. In 2023 it stood at $262,000 and should approach $275,000 in 2024 (if needed).
As an important reminder, we do not provide tax advice and urge you to consult with your tax professional to address your specific tax situation.
Please reach out with any questions and we will do our best to address them.
Disclosures
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Riverview Trust Company does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
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