Washington state capital gains tax. Does it apply to you?

Washington state now has a capital gains tax! It's 7% on realized long-term capital gains above $250,000 in a calendar year. Watch this video for more details!

Transcript:

In today's video, we're talking all about the brand new Washington State Long -Term Capital Gains Tax. I'm Chris Kaminski, co -founder and partner here with Consilio Wealth, where we specialize in working with technology professionals, specifically at Amazon, Microsoft, Meta, and Google.

The new Washington State capital gains tax. This is a 7% tax on any long-term capital gains above $250,000 in a calendar year. And this tax is payable back to Washington State.

Let's give you a couple of examples. Let's say that you sell $400,000 of Microsoft stock, and in doing so, you lock in a $100,000 capital gain. You will not owe the Washington State capital gains tax because that $100,000 capital gain is less than 250.

Second example let's say that you book a $400,000 sale of Microsoft stock, and this time you lock in a $300,000 capital gain. You selected an older lot, perhaps, which locked in a higher gain. In that instance, you would be subject to the long-term capital gains tax in Washington state because the $300,000 capital gain is over the $250,000 exemption. In that instance, $50,000, just simply the difference between the total gain and the exemption amount, would be subject to a 7% tax payable back to Washington state. It's about 3,500 bucks.

It is notable that long-term capital losses can be used against long-term capital gains. So in that example where you had a $300,000 capital gain, let's say that you did some tax loss harvesting earlier in the year, you had other positions that you wanted to sell at a loss, and you booked a $100,000 capital loss, you can use the long-term loss against the long-term gain to establish a net capital gain number, which could help you avoid the tax.

It's notable, however, that short-term capital losses cannot be used against long-term capital gains, for the purposes of the Washington State tax. This is different than at the federal level, which can use those.

So in Washington State, if you have a lot of shares that is at a loss that is say a month or two months from going long-term, which means you've held it for more than a year, you might consider holding that for a little bit longer before you sell if in that year you think you will also be over $250,000 of long-term capital gains because that loss could help offset your capital gains.

It's also notable that, real estate sales are excluded from this tax. There are a whole host of other taxes in transacting and selling real estate. There'll be another video on that, but primarily this tax is on stock sales. If you're looking for a full list of exclusions, just Google Washington State Capital Gains Tax Exclusions, or if you're looking for more information on the tax, just Google Washington State Capital Gains Tax. You will likely land on the Washington State Department of Revenue site where it outlines the tax and the exclusions.

All right, hope this video was helpful.