In 2021, the Washington State Legislature passed ESSB 5096 (RCW 82.87) creating a 7% tax on the sale or exchange of long-term capital assets such as stocks, bonds, digital assets, business interests, or other investments and tangible assets. The capital gains tax does not apply to the sale or exchange of real estate, nor to transactions through retirement savings accounts.
The Washington State capital gains tax only applies to gains allocated to Washington state and applies only to individuals. However, individuals can also be liable for the tax because of their ownership interest in a pass-through entity or disregarded entity that sells or exchanges long-term capital assets.
The Washington State capital gains tax includes an annual standard deduction that reduces the amount of taxable long-term gains:
| Tax Year | Annual Standard Deduction |
| 2022 | $250,000 |
| 2023 | $262,000 |
| 2024 | $270,000 |
| 2025 | $278,000 |
The standard deduction is adjusted annually using a formula based on the consumer price index.
The annual standard deduction is per individual and, 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 Washington State capital gains tax return can be prepared and filed through the Washington Department of Revenue website here.
See here for video assistance on completing the form.
Note: The Washington State Capital Gains return is not supported in TaxSlayer Pro. Taxpayers should review Washington State capital gains tax guidance and filing requirements before completing the return.
Additional Information:
Washington DOR: Capital Gains FAQ