Does Washington have a capital gains tax on real estate?
Washington has a capital gains tax, but real estate is exempt from it. The tax, in chapter 82.87 RCW, falls on long-term gains from assets like stocks, bonds and business interests, and the Department of Revenue lists sales of real estate among the gains that are not taxed.
So when you sell an apartment building in Seattle, Tacoma or Spokane in 2026, Washington takes no share of the gain itself. The state has no personal income tax either. What it does charge is the real estate excise tax (REET), which is figured on the sale price rather than the profit and is usually paid by the seller at closing. On a $2 million building, the state part of REET is $31,637.50 before any local rate.
Washington state capital gains tax rates in 2026
For gains on assets other than real estate, Washington charges 7% on the first $1,000,000 of taxable long-term gain and 9.9% on the part above $1,000,000. The second tier is a 2.9% surcharge that ESSB 5813 added starting with tax year 2025.
Taxable gain is figured after a standard deduction that is indexed every year. It was $278,000 for 2025, and the Department of Revenue had not posted the 2026 figure when this page was updated. None of this touches a building sale, but it matters if you also sell a stock portfolio or a share of a business in the same year.
| Long-term capital gain (after the standard deduction) | Washington rate | Applies to real estate? |
|---|---|---|
| First $1,000,000 | 7% | No |
| Above $1,000,000 | 9.9% (7% plus 2.9%) | No |
Why real estate sales are exempt
The Legislature wrote the exemption into the capital gains statute, so selling land or buildings in any state produces no Washington capital gains tax. The exemption also reaches gain from selling an interest in an LLC, partnership or other entity, to the extent that gain comes directly from real estate the entity owns.
That second point helps owners who hold a building through an LLC and sell their membership interests instead of deeding the property. The gain tied to the real estate stays outside the capital gains tax. A sale of entity interests can still trigger REET under the controlling interest rule covered below, so the exemption from one tax does not mean the deal is free of the other.
The real estate excise tax: what Washington sellers pay
REET is the tax that replaces a state capital gains bill on a Washington property sale. Under chapter 82.45 RCW, the state rate climbs in four steps based on the selling price, and the steps work like income tax brackets: each rate applies only to the part of the price inside its band.
For sales from January 1, 2023 through December 31, 2026, the bands start at $525,000, $1,525,000 and $3,025,000. Starting January 1, 2027, they move up to $551,000, $1,551,000 and $3,051,000. The rates stay at 1.1%, 1.28%, 2.75% and 3.0%. Agricultural and timberland keep a flat 1.28% state rate.
Cities and counties add a local REET on top of the state tax. The Department of Revenue publishes the local rate for each location, and your escrow officer will add it to the state figure. The tax is due on the date of sale whether or not the deed has been recorded, and penalties and interest start if it is not paid within a month. The seller normally pays it, but if the seller does not, the buyer becomes responsible and the unpaid tax can become a lien on the property.
| State REET rate | Portion of price, sales through Dec. 31, 2026 | Portion of price, sales from Jan. 1, 2027 |
|---|---|---|
| 1.1% | Up to $525,000 | Up to $551,000 |
| 1.28% | $525,000.01 to $1,525,000 | Over $551,000 to $1,551,000 |
| 2.75% | $1,525,000.01 to $3,025,000 | Over $1,551,000 to $3,051,000 |
| 3.0% | Over $3,025,000 | Over $3,051,000 |
Does the 2027 change lower REET on an apartment sale?
Yes, slightly. Because each band starts $26,000 higher in 2027, less of the price falls into the upper rates. The state REET on a $2,000,000 sale drops from $31,637.50 in 2026 to $31,208.50 in 2027, a saving of $429. On a $4,000,000 building the state tax falls from $89,075 to $88,581.
That is too small to justify holding a property past year end on its own. Price, buyer terms and your exchange timeline will move the net proceeds far more than the bracket shift.
REET on entity sales: the controlling interest rule
Selling 50% or more of an entity that owns Washington real estate is taxed as a controlling interest transfer. The tax is based on the true and fair value of the property the entity owns, and transfers by the same parties are combined over a 36-month lookback.
The return is due within five days of the transfer, and the payment has to be postmarked within five days as well. If you plan to sell membership interests in stages to keep each sale small, the lookback period usually defeats that plan.
How federal tax applies to a Washington property sale
With no state tax on the gain, federal tax is the whole income tax bill on a Washington building sale. For 2026, Revenue Procedure 2025-32 sets the long-term capital gains rate at 0% up to $98,900 of taxable income on a joint return ($49,450 single), 15% up to $613,700 ($545,500 single) and 20% above that.
Depreciation you claimed on the building is taxed federally at up to 25% as unrecaptured Section 1250 gain. The 3.8% net investment income tax applies once modified AGI passes $250,000 on a joint return or $200,000 single. REET is a selling expense, so it reduces your federal gain, which slightly offsets the cost of the excise tax itself. A building held one year or less produces short-term gain, taxed federally at ordinary rates up to 37%.
Nonresident sellers and withholding at closing
Washington has no income tax withholding on real estate sales, for residents or nonresidents. An owner in California or Arizona who sells a building in Vancouver, Washington pays REET at closing like anyone else, and that is the only Washington tax on the deal.
REET is a transfer tax, not a prepayment of income tax, so it is never refunded the way an estimated withholding payment can be in other states. Your home state may still tax the gain if it taxes residents on income from everywhere, and federal withholding rules can apply to foreign sellers.
Depreciation recapture in Washington
Washington does not tax depreciation recapture on real estate. Since real estate is outside the capital gains tax and there is no income tax, the depreciation you took over the years is taxed only by the IRS.
That includes the 25% federal rate on unrecaptured Section 1250 gain and ordinary federal rates on any Section 1245 recapture from personal property identified in a cost segregation study. The depreciation recapture calculator can estimate that federal piece.
Worked example: selling a $2 million apartment building in Washington
Picture a married couple in Spokane who sell a 14-unit building for $2,000,000 in 2026. They paid $1,100,000 for it in 2015 and have claimed $320,000 of depreciation. Commissions and other closing costs come to $80,000, and the state REET is $31,637.50. Their other income already puts them in the 20% federal bracket.
The federal bill is about $279,790. Washington’s capital gains tax adds nothing, so the total tax on the sale, counting state REET, is about $311,428. Local REET for the property’s location would be added on top of that.
If the same building were in a state that taxes gains as income, the state bill could easily reach tens of thousands of dollars more. In Washington, the transfer tax is the only state charge, and it is set by price, not profit.
| Line | Amount |
|---|---|
| Sale price | $2,000,000 |
| Less commissions and closing costs | $80,000 |
| Less state REET (1.1%, 1.28% and 2.75% bands) | $31,637.50 |
| Adjusted basis ($1,100,000 cost less $320,000 depreciation) | $780,000 |
| Total gain | $1,108,362.50 |
| Federal 25% on $320,000 of depreciation | $80,000 |
| Federal 20% on $788,362.50 of appreciation | $157,672.50 |
| Federal 3.8% NIIT on $1,108,362.50 | $42,117.78 |
| Washington capital gains tax | $0 |
| Total federal tax plus state REET | $311,427.78 |
How a 1031 exchange changes the Washington tax bill
A 1031 exchange can defer the federal tax, but it does not remove REET. In the example, a full exchange would push the $279,790 of federal tax into the future, while the $31,637.50 of state REET and the local REET would still be due at closing.
There is no Washington income tax to defer, so the state has no conformity rules or clawback to worry about. When a qualified intermediary takes title in the exchange, Washington taxes that transfer, and the second deed from the intermediary is exempt only if certain conditions are met. Our guide to a 1031 exchange in Washington walks through those rules, and the 1031 exchange rules page covers the federal deadlines.
What we know about the 2028 millionaires’ tax
In March 2026 the governor signed SB 6346, now chapter 238, Laws of 2026, which creates a 9.9% tax on annual income over $1,000,000 starting in 2028. The legislative record shows an effective date of June 11, 2026 for the act, with the tax itself applying to income from January 1, 2028. A lawsuit asking a court to strike it down was filed in Klickitat County Superior Court in April 2026.
How the new tax treats a gain from selling real estate is not settled. The official summaries we reviewed do not answer it, and the rules for 2028 returns have not been written. Sellers planning a large sale in 2028 or later should ask a CPA to read the final law and any Department of Revenue guidance before relying on the current exemption.
Selling a Washington apartment building to Skyline
Skyline buys apartment buildings with five or more units in Washington, from King and Snohomish counties to Spokane and Clark County. We buy directly, close on your timeline, and can work inside 1031 deadlines. If you are exchanging, we can set a closing date that gives you room to find a replacement, and we coordinate the REET affidavit and the intermediary paperwork with your escrow officer.
Selling? Spread the tax with seller-carry terms
If a large tax bill is what is keeping you from selling, an installment sale may help. When you carry part of the price as a note, the gain is generally reported as you receive payments instead of all in the year of sale. Some parts of the gain, such as certain depreciation recapture, can still be due up front, so run the numbers with your CPA first.
Skyline Capital Investments buys apartment buildings with five or more units and can offer seller-carry terms, or a delayed closing that fits your 1031 timeline. Send the address and unit count and we typically respond within 48 hours. How seller financing works · How an installment sale is taxed · Seller financing calculator.
Get A Seller-Carry Offer
