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Capital Gains Tax in Washington: Complete Guide 2026

Tax information is for educational purposes only and does not constitute tax advice. Consult a licensed tax professional for your specific situation.

Washington State has no general income tax, but it imposes a 7% capital gains tax on the sale of long-term capital assets exceeding $250,000. Enacted in 2021 and upheld by the Washington Supreme Court in 2023, this tax applies to stocks, bonds, and other financial assets but excludes real estate, retirement accounts, and certain business assets. Washington’s capital gains tax is one of the most debated tax policies in the country.

Washington Capital Gains Tax Rates (2026)

Component	Detail
Washington capital gains tax rate	7.00%
Threshold	Long-term gains exceeding $250,000
Federal long-term capital gains	0%, 15%, or 20%
Net Investment Income Tax (NIIT)	3.8% (MAGI over $200K single / $250K MFJ)

Combined Rate for Washington Residents

Gain Amount	Federal Rate	WA Rate	NIIT	Total
First $250,000	15%—20%	0%	3.8%*	18.8%—23.8%
Over $250,000	15%—20%	7%	3.8%*	25.8%—30.8%

NIIT applies to taxpayers with MAGI above $200,000 (single) or $250,000 (MFJ).

The maximum combined rate on gains above $250,000 is 30.8% — higher than other no-income-tax states but still below California’s maximum of ~37.1%.

How It Works

What Is Subject to the Tax

The 7% tax applies to long-term capital gains (assets held more than one year) from the sale or exchange of:

Stocks and publicly traded securities
Bonds and mutual funds
Partnership interests
Other intangible personal property

The tax applies only to the portion of gains exceeding $250,000 in a calendar year. A taxpayer with $400,000 in qualifying long-term gains owes 7% on $150,000 (the amount over $250,000), which equals $10,500.

What Is Excluded

Several significant categories of gains are excluded from the tax:

Real estate: All gains from the sale of real property (primary residence, investment property, commercial property) are excluded.
Retirement accounts: Gains within 401(k)s, IRAs, pensions, and other qualified retirement plans are excluded.
Livestock, timber, and agricultural products
Goodwill from the sale of a business where the seller materially participated for at least five of the prior ten years (a “qualified family-owned small business” deduction of up to $10 million)
Depreciable property used in a trade or business

Filing Requirements

Washington capital gains tax returns are due April 15 of the following year (matching the federal deadline). The tax is administered by the Washington Department of Revenue, not the IRS. You must file if your long-term gains from covered assets exceed $250,000.

Charitable Donation Deduction

Washington allows a deduction for charitable contributions of up to $250,000 against the capital gains subject to the tax. This effectively doubles the threshold for taxpayers making large charitable gifts.

Comparison to National Average

Metric	Washington	Texas / Florida	California	Oregon
Capital gains tax rate	7% (over $250K)	0%	Up to 13.30%	Up to 9.90%
Real estate gains	Excluded	N/A (no tax)	Taxed as income	Taxed as income
Max combined rate (LT)	30.8%	23.8%	~37.1%	~33.7%

Washington occupies a middle ground — it taxes high-value financial asset sales but excludes real estate and provides a generous $250,000 threshold. For most investors with moderate gains, no state capital gains tax applies.

Tips for Minimizing Washington Capital Gains Tax

Stay below the $250,000 threshold. If possible, spread the realization of gains across multiple tax years to keep each year’s total below $250,000.
Use the real estate exclusion. Since real estate gains are excluded, Washington remains highly favorable for property investors. 1031 exchanges are unnecessary for state tax purposes (though still valuable federally).
Maximize the charitable deduction. Donations up to $250,000 offset gains dollar-for-dollar for state purposes. Donating appreciated stock eliminates both federal and state capital gains tax on the donated portion.
Harvest losses strategically. Capital losses offset gains before the $250,000 threshold is applied. Realizing losses in the same year as large gains can reduce or eliminate the Washington tax.
Evaluate the qualified family-owned small business deduction. If you are selling a business in which you materially participated for 5+ of the last 10 years, up to $10 million in gains may be excluded.
Consider the joint filing impact. The $250,000 threshold is per return, not per person. Married couples filing jointly share a single $250,000 threshold. However, couples filing separately each receive their own $250,000 threshold.
Track gains carefully by asset type. Only gains from covered financial assets count toward the threshold. Real estate gains, retirement account distributions, and excluded asset sales do not count.

Key Takeaways

Washington imposes a 7% tax on long-term capital gains exceeding $250,000 from the sale of stocks, bonds, and certain other financial assets
Real estate, retirement accounts, and certain business sales are excluded
The maximum combined federal-plus-state rate is 30.8% — higher than other no-income-tax states but below California and New York
The $250,000 threshold and charitable deduction provide meaningful relief for most investors
The tax is relatively new (2021) and generates significant annual debate about potential changes
Loss harvesting and gain spreading are the most effective strategies for managing the threshold

Next Steps

See the full Washington tax picture at Taxes in Washington: State Tax Guide 2026
Compare all states at State Income Tax Rates Comparison 2026
Calculate your liability with the Capital Gains Tax Calculator
Review strategies in the Capital Gains Tax Guide
Get professional guidance: Find a CPA Near You