Insights

March 28, 2023

How Do You File a Washington State Capital Gains Tax Return?

In Tax Planning, Wealth Strategy

The 2021 Washington State Legislature passed ESSB 5096 (RCW 82.87) which creates a 7% tax on the sale or exchange of long-term capital assets such as stocks, bonds, business interests, or other investments and tangible assets.  The tax is effective January 1, 2022, and the first payments for tax year 2022 are due on or before April 18, 2023.  CPAs can file this tax return on behalf of their clients if taxpayers grant them access to their Washington State Department of Revenue Capital Gains Account.  Below are some guidelines to help explain this new tax and the recently released steps regarding how to set up a DOR Capital Gains Account.

Who Needs to File?

Only individuals owing capital gains tax are required to file a capital gains tax return, along with a copy of their federal tax return for the same taxable year.

What is the due date for the Washington State Capital Gains Tax Return?

The capital gains tax return is due at the same time as the individual’s federal income tax return.  Individuals who file an extension for their federal income tax return are entitled to the same filing extension for their capital gains tax return.  You will need to file for these extensions separately.  However, a filing extension does not extend the due date for paying the capital gains tax due.

When is the tax payment due?

By April 18, 2023

What is Subject to Tax?

The tax is imposed specifically on long-term gains from the sale or exchange of capital assets.

What is NOT Subject to Tax?

Ordinary income, short-term capital gains, dividends, and interest are all excluded from the tax.  Certain categories of assets are also excluded, most notably real estate (whether held directly or through a privately owned entity).  Other exclusions cover assets held in retirement accounts, tangible property that was used in a trade or business prior to its sale, interests in qualified family-owned small businesses, certain livestock, timber, and commercial fishing privileges.

What Deductions and Exemptions are Available?

An annual standard deduction of $250,000 is available to each individual and married couple (unlike under federal law, married couples are not allowed a higher shared amount).  Spouses who file a joint return for federal income tax must also file jointly for purposes of the Washington capital gains tax.  An additional deduction of up to $100,000 is allowed for charitable contributions in excess of $250,000 to Washington-based nonprofits made by the taxpayer during the year.  The 7% tax rate is applied to capital gains exceeding the deductible amount, with a limited credit available to the extent income or capital gains taxes are paid by the taxpayer to other jurisdictions.

How Do I File a Return?

  1. Sign up for a Secure Access Washington (SAW) account to access the online system, My DOR.
  2. Once signed up and logged in you will need to create a Capital Gains account.
  3. After creating a Capital Gains account, we recommend you give your CPA access to your account in order to prepare and file the return on your behalf.

You can download Illustrated instructions for these three steps.

As always, please reach out to your wealth management team with questions and we will work with your CPA to help navigate this situation.

Insights Tags

Related Articles

March 13, 2024

Risk Tolerance vs Asset Allocation: Finding the Right Balance

When people hear the word risk, they usually visualize “dangerous” things like riding a motorcycle, starting a business, or maybe even a high-stakes game of poker. Taking on risk often comes with the potential for reward – in poker, you can never win a big hand if you don’t ante up. In investing, there is [...]

Contributions from: Bryan Carr, CFA®, Jay Winston, CFP®, Jordan Travis, MBA, FPQP™

March 8, 2024

Balancing Act: Women, Work, and Wealth Management

How often do we hear the women in our lives being referred to as “superhuman?” Women have long played the role of multitasking maestros – navigating the delicate balance between career aspirations and unnoticed work at home. A 2023 study by the Pew Research Center found almost half of women in heterosexual marriages earn as [...]

Katie MietusAlexandra Lambert
Contributions from: Katie Berntson, CFP®, Alexandra Lambert, Larissa Vidal, CFP®

March 8, 2024

Embracing Empowerment: A Wealth Manager’s Perspective on Women’s Leadership

As we celebrate International Women’s Day, I find myself reflecting on the powerful moments shared at the recent Coldstream ‘Invest in Women’ event featuring Julie Larson-Green, Chief Technology Officer at Magic Leap. Surrounded by a diverse group of inspiring women, the energy in the room was palpable, fueled by the authenticity and wisdom imparted by [...]

Contributions from: Anne Marie Stonich, CFP®, CPA