Washington capital gains tax on real estate is zero: the state's 7% capital gains excise tax, and its 2.9% surcharge on gains over $1 million, exempt real property sold by deed. What a Washington seller does pay is the graduated real estate excise tax (REET) at closing, which no exchange can defer. A 1031 exchange in Washington is therefore about the federal bill, which takes about a quarter of a typical rental gain once depreciation recapture and the 3.8% surtax are counted.
Reviewed by Jon Hilley, CEO & Founder of 1031 Specialists. Last reviewed September 29, 2026.
| State tax on real estate gains | None. Real estate sold by deed is exempt from the capital gains excise tax (RCW 82.87.050) |
|---|---|
| Long-term capital gains treatment | 7% excise tax on other long-term gains above a standard deduction ($278,000 for 2025, indexed yearly), plus 2.9% on gains above $1,000,000 |
| Nonresident withholding at closing | None |
| Withholding form | Not applicable. The REET affidavit is filed at closing instead |
| Transfer or conveyance tax (a 1031 does not defer it) | State REET 1.1% to 3.0% by price tier, plus local REET (0.50% in Seattle, Bellevue, Tacoma and Spokane) |
| Clawback on out-of-state replacement property | None |
| Conforms to Section 1031 | Not needed for real estate, since no state tax applies to the gain |
| Estate tax note | Washington estate tax: $3,000,000 exclusion, rates up to 35% on the taxable estate above $9,000,000 |
Table of contents
- How much is capital gains tax on real estate in Washington?
- Washington tax on a $300,000 gain: worked example
- Is there nonresident withholding in Washington?
- Washington real estate excise tax (REET) and local rates
- Conformity and clawback in Washington
- Does Washington's capital gains tax apply to real estate? What the exemption covers
- Washington estate tax and the swap-till-you-drop strategy
- Moving into or out of Washington
- Where Washington 1031 exchanges happen
- Federal 1031 rules that apply in Washington
- Common Washington 1031 exchange mistakes
- Start your Washington 1031 exchange
- Frequently asked questions
- Sources
How much is capital gains tax on real estate in Washington?
For a deeded sale of land, a house, an apartment building or a commercial property, the Washington capital gains tax is $0. The excise tax in chapter 82.87 RCW charges 7% on an individual's Washington capital gains, and since January 1, 2025 an extra 2.90% on the portion above $1,000,000, for a combined 9.9% at the top. But RCW 82.87.050 exempts "all real estate transferred by deed, real estate contract, judgment, or other lawful instruments" recorded with the county.
That exemption covers depreciation recapture too. Washington has no personal income tax, so the unrecaptured §1250 gain on a rental that the IRS taxes at up to 25% carries no state layer. There are also no city or county income taxes in Washington.
Where the tax still reaches investors:
- Entity sales. If you sell membership interests in an LLC instead of deeding the property, the exemption applies only to the extent the gain is directly attributable to real estate the entity owns directly.
- Non-real-estate assets in the deal. Furniture in a furnished rental, equipment, or business goodwill sold with a hotel or storage facility are long-term capital assets, not real estate. Most sellers stay under the standard deduction ($278,000 for 2025, adjusted for inflation each year), but a large allocation can create a filing.
- Stocks and funds. If you are weighing a 1031 against selling and investing in securities, remember the later sale of those securities is subject to the 7% tax. Our capital gains vs. 1031 exchange comparison lays out the tradeoff.
So the tax a Washington exchange defers is federal: 0%, 15% or 20% on long-term gain (20% above $613,700 of taxable income for joint filers in 2026, $545,500 single), up to 25% on unrecaptured §1250 gain, and the 3.8% net investment income tax above $250,000 of joint MAGI ($200,000 single).
Washington tax on a $300,000 gain: worked example
Assumptions: a $300,000 long-term gain on a Washington investment property, $100,000 of it unrecaptured §1250 depreciation, a married couple filing jointly who are already in the top federal bracket, and a deeded sale.
| Line | Math | Tax |
|---|---|---|
| Unrecaptured §1250 gain (federal) | 25% x $100,000 | $25,000 |
| Long-term capital gain (federal) | 20% x $200,000 | $40,000 |
| Net investment income tax | 3.8% x $300,000 | $11,400 |
| Federal subtotal | $76,400 | |
| Washington capital gains excise tax | Real estate exempt under RCW 82.87.050 | $0 |
| Washington income tax | None | $0 |
| Total deferred by a full 1031 exchange | $76,400 |
Every dollar of that $76,400 is federal. Your recapture figure will differ with your depreciation history; run your own numbers in the depreciation recapture calculator. REET is not on this list because it is owed at closing whether or not you exchange.
Is there nonresident withholding in Washington?
No. With no income tax on real estate, Washington has no state withholding when a nonresident sells. Escrow collects REET, not an estimated income tax payment. A California or Oregon resident selling a Bellevue rental gets full proceeds (less REET and costs) sent to the qualified intermediary.
Two things can still apply. Federal FIRPTA withholding of up to 15% of the price applies when the seller is a foreign person; see our guide on foreign sellers and FIRPTA. And your home state may tax the gain: an Oregon resident owes Oregon tax on a Washington sale unless the exchange defers it.
Washington real estate excise tax (REET) and local rates
REET is Washington's real cost of selling, and it is due at closing on the relinquished property even when the exchange defers every dollar of federal tax. The seller usually pays it; if the seller does not, the buyer is liable. The state rate is graduated by selling price, and each tier applies only to the portion of the price inside it.
| Portion of selling price (through 2026) | State rate | From Jan. 1, 2027 |
|---|---|---|
| $525,000 or less | 1.10% | $551,000 or less |
| $525,000.01 to $1,525,000 | 1.28% | $551,000.01 to $1,551,000 |
| $1,525,000.01 to $3,025,000 | 2.75% | $1,551,000.01 to $3,051,000 |
| Above $3,025,000 | 3.0% | Above $3,051,000 |
Agricultural and timberland is taxed at a flat 1.28% state rate. Local REET is added on top. The Department of Revenue's May 2026 rate table shows 0.50% in Seattle, Bellevue, Tacoma and Spokane, 0.25% in many smaller jurisdictions, and 2.00% in San Juan County.
Example: a $1,500,000 Seattle fourplex. State REET is 1.1% of $525,000 ($5,775) plus 1.28% of $975,000 ($12,480), or $18,255. Seattle's 0.50% local REET adds $7,500. Total: $25,755, paid from the sale proceeds before the rest goes to your intermediary.
How REET treats the exchange itself. Under WAC 458-61A-213, a transfer into an exchange facilitator is taxable, but the later transfer out of the facilitator is exempt when tax was paid on the first leg, a supplemental statement shows the facilitator held title only for the exchange, and the funds came from the exchanger. Most exchanges avoid the issue entirely because the deed goes straight from seller to buyer, so REET is paid once. On the purchase side, the seller of your replacement property normally pays the REET, so buying in Washington adds little transfer cost for you.
Conformity and clawback in Washington
Washington has nothing to conform or claw back for real estate. There is no personal income tax, so there is no state version of Section 1031 to follow, no annual reporting form for out-of-state replacement property, and no state tax waiting when you eventually sell the replacement. If you exchange a Spokane duplex into a Texas warehouse and later sell the warehouse, Washington has no claim.
The one caution runs the other way. If the property you sold in Washington was acquired in an earlier exchange out of a clawback state, that state may still be tracking the deferred gain. Oregon requires Schedule OR-24 every year until the replacement property is disposed of, and California has Form FTB 3840.
Does Washington's capital gains tax apply to real estate? What the exemption covers
This is the question Washington investors search most, and the answer depends on how the property is held and what is sold.
- Covered: land, homes, rentals, and commercial buildings transferred by deed or real estate contract and recorded with the county.
- Partly covered: interests in a privately held entity, but only to the extent the gain comes from real estate the entity owns directly. Selling your share of an LLC that owns an apartment complex usually qualifies; a gain from the entity's other assets does not.
- Not covered: stocks, bonds, most business assets and personal property sold alongside the real estate.
Because real estate is exempt, the tax has no bearing on whether a Washington 1031 works. It matters when you exit: if you sell a rental and buy an index fund, the rental gain is exempt but the fund's future gains are not. A 1031 into Delaware Statutory Trust interests keeps the investment in real estate; our beginner guide to DST properties covers how those work. How Washington classifies a later sale of DST interests is a question for your CPA, since a DST is a trust rather than a deed.
Washington estate tax and the swap-till-you-drop strategy
Many Washington owners exchange for decades and hold until death, when heirs receive a stepped-up basis and the deferred federal income tax disappears. Our guide to swap till you drop explains the mechanics. In Washington that plan has a second tax to account for: the state estate tax.
For deaths on or after July 1, 2025, the exclusion is $3,000,000, and the Department of Revenue notes it is not scheduled to rise because the inflation adjustment in the statute has expired. Rates are graduated up to 35% on the portion of the taxable estate above $9,000,000 (RCW 83.100.040). A 1031 exchange grows the estate by keeping tax dollars invested, so owners with large portfolios should pair their exchange strategy with estate planning.
Moving into or out of Washington
Selling Washington property as a nonresident. Washington does not tax the gain, but your home state may. An Oregon resident owes Oregon income tax on a Washington sale unless it is exchanged, and California residents are taxed on worldwide gains.
Moving to Washington with exchanged property. If you left Oregon or California after exchanging property there into a Washington replacement, the old state's claim on the deferred gain can follow you. Oregon requires Schedule OR-24 each year until you dispose of the replacement, and it expects its share when you sell, even as a Washington resident.
Exchanging out of Washington. Popular destinations are Idaho (Coeur d'Alene and Boise are a short move for Spokane investors), Arizona and Texas. Buying in a state with an income tax means you will owe that state's tax on rent and on any later taxable sale, which you did not owe in Washington. Buying in Nevada keeps you in a no-income-tax state.
Where Washington 1031 exchanges happen
The Puget Sound region drives most Washington exchange volume. Seattle and Eastside owners of older multifamily and small commercial buildings often trade into newer, lower-maintenance property or net-leased assets out of state, especially where the 2.75% and 3.0% REET tiers make holding and trading up locally expensive. See our page on the 1031 exchange in Seattle for local detail.
Outside Seattle, Tacoma and Everett see steady apartment trades, Spokane draws investors from the west side looking for lower entry prices, and Vancouver sits in the Portland market with Oregon buyers on the other side of the river. Our overview of the 1031 exchange process in Washington State includes examples from Seattle and Spokane investors.
Federal 1031 rules that apply in Washington
Identify replacement property in writing by day 45 and close by day 180 after the sale (or your return due date, if earlier). A qualified intermediary must hold the proceeds; touching the cash ends the exchange. To defer everything, buy at least as much as you sold and replace the debt you paid off, with cash or new financing. Our 1031 exchange guides go deeper, the 45-day identification validator checks your list, and the boot calculator prices any shortfall.
Common Washington 1031 exchange mistakes
- Budgeting as if the exchange saves REET. On a $3 million sale, state and Seattle local REET run well over $60,000, and it comes out of proceeds at closing. Plan the replacement price with that money gone.
- Skipping the exchange because "Washington has no capital gains tax on real estate." The state exemption does nothing about the federal 20%, 25% recapture and 3.8% surtax, which is $76,400 on a typical $300,000 gain.
- Selling LLC interests when you meant to sell the building. Membership interests are not like-kind real estate for a 1031, and the Washington exemption only covers the gain attributable to real estate the entity owns directly.
- Lumping personal property into a furnished-rental or hospitality sale. Furniture and business assets do not qualify for a 1031 and are outside the real estate exemption. Allocate the price in the purchase agreement.
- Timing a high-value sale around the 2027 REET thresholds. The tier thresholds rise on January 1, 2027. The difference is modest (about $26,000 of each tier moves to a lower rate), so do not let it push a closing past your 180-day deadline.
Start your Washington 1031 exchange
Call us before you sign the closing documents, ideally when you list. We prepare the exchange agreement and the assignment language for your escrow officer, hold the proceeds in a segregated account, and track your 45-day and 180-day dates. Start your exchange online, book a free intro call, or call (631) 438-1031.
Frequently asked questions
How can I avoid capital gains tax on real estate in Washington?
Washington already exempts deeded real estate from its 7% capital gains excise tax, so there is no state tax to avoid. The federal tax remains: up to 20% on the gain, 25% on depreciation recapture and 3.8% net investment income tax. A 1031 exchange into like-kind property defers all of it. REET is still due at closing.
Does Washington's 7% capital gains tax apply to selling a rental property?
No. RCW 82.87.050 exempts real estate transferred by deed or real estate contract and recorded with the county. The exemption also covers gains from selling an interest in a private entity to the extent the gain comes from real estate the entity owns directly.
Does a 1031 exchange avoid REET in Washington?
No. REET is a tax on the transfer, so it is due on the sale of your relinquished property even in a 1031 exchange. The state rate runs from 1.1% to 3.0% by price tier, plus local REET, usually paid by the seller.
Is there nonresident withholding when selling Washington real estate?
No. Washington has no income tax on real estate gains, so escrow does not withhold state tax from a nonresident seller. Federal FIRPTA withholding can apply if the seller is a foreign person, and the seller's home state may tax the gain.
What are the Washington REET rates in 2026?
State REET is 1.1% on the portion of the price up to $525,000, 1.28% up to $1,525,000, 2.75% up to $3,025,000 and 3.0% above that. Local REET is added, 0.50% in Seattle, Bellevue, Tacoma and Spokane. The tier thresholds rise on January 1, 2027.
Should I still do a 1031 exchange if Washington has no state tax on my gain?
Usually, yes, if you plan to keep investing in real estate. On a $300,000 gain with $100,000 of depreciation, the federal tax for a top-bracket joint filer is about $76,400. The exchange keeps that money invested.
Sources
- Washington Department of Revenue: Capital gains tax
- RCW 82.87.040: Capital gains tax rates
- RCW 82.87.050: Real estate exemption
- Washington Department of Revenue: Real estate excise tax
- Washington Department of Revenue: Local REET rates (May 2026)
- WAC 458-61A-213: REET and tax deferred exchanges
- Washington Department of Revenue: Estate tax
- RCW 83.100.040: Estate tax rates
Related: Oregon, Idaho, Nevada, California, and all 50 states.
This page explains Washington and federal rules in general terms and is not tax or legal advice. Confirm your own numbers with a CPA or attorney before you sell.
