On Monday, May 20, Governor Bob Ferguson signed Senate Bill 5813 into law, introducing key changes to Washington’s tax landscape that may impact high net worth individuals and their estate planning strategies.
Capital Gains Tax Update
Washington’s capital gains tax now includes an additional 2.9% on long-term capital gains exceeding $1 million, bringing the total tax rate on those gains to 9.9%. This new rate is retroactive to January 1, 2025, and is in addition to the existing 7% tax on gains above $250,000.
Estate Tax Changes
For estates of decedents dying on or after July 1, 2025, the estate tax exemption will be $3 million. Beginning in 2026, this exemption amount will be adjusted annually for inflation based on the Consumer Price Index. Estate tax rates will range from 10% to 35% and will continue to apply to the current tiers so that the top rate of 35% will apply to estates that exceed the exemption by $9 million.
It is important to note that Washington State still does not have portability for spouses, nor does it have a gift tax.
This alert is based on the Engrossed Substitute Senate Bill 5813 as passed by the House and Senate. The Washington State Legislative website has not yet reflected the Governor’s signature, so details of the signed bill remain to be confirmed.
If you have questions about how these changes might affect you or your family, or if you’d like to revisit your estate planning strategy, our team is here to help.
