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Washington State Increases Estate and Capital Gains Taxes
The Highlights: A Higher Tax Burden for Families with Ties to Washington
Washington State recently passed significant changes to its estate and capital gains tax laws that could affect international families and business owners with property, heirs, or investments in the state. These changes reflect a broader trend in state-level taxation and underscore the importance of proactive, location-specific planning.
Who does this impact? For international clients with U.S.-based family members, real estate, or business holdings, these rate increases introduce new complexities—and new opportunities to revisit your long-term strategy.
The estate tax changes are currently slated to take effect July 1, 2025, giving families and business owners a limited window for proactive planning. The capital gains tax rate is retroactive to January 1, 2025.
Key Changes at a Glance
| Net Estate Bracket | Prior Estate Tax Rate | New Estate Tax Rate |
| $0 – $1,000,000 | 10% | 10% |
| $1,000,001 – $2,000,000 | 14% | 15% |
| $2,000,001 – $3,000,000 | 15% | 17% |
| $3,000,001 – $4,000,000 | 16% | 19% |
| $4,000,001 – $6,000,000 | 18% | 23% |
| $6,000,001 – $7,000,000 | 19% | 26% |
| $7,000,001 – $9,000,000 | 19.5% | 30% |
| $9,000,000 + | 20% | 35% |
| Net Long-Term Capital Gains | Tax Rate |
| $0 – $270,000
(inflation-adjusted as of 2024) |
Exempt (0%) |
| $270,001 – $1,000,000 | 7% |
| $1,000,001 + | 9.9% |
Why This Matters for International Clients
Many international families may not realize that Washington taxes estates based on situs (the place where something exists or originates), not residency. This means U.S. real estate, business interests, or tangible assets located in Washington can trigger a state estate tax—even if the owner lives abroad.
Washington capital gains tax, on the other hand, applies only to residents of Washington state. Accordingly, international businesses with any Washington owners and international families with Washington beneficiaries should be aware of the capital gains tax so it can be mitigated. In some cases, this can layer on top of federal tax obligations, leading to significant combined tax exposure.
Planning Considerations
Now is the time to evaluate your exposure. Questions to consider:
- Do you own property or business interests in Washington?
- Are your heirs or beneficiaries located in Washington?
- Is anyone in your ownership group located in Washington?
- Do you have plans to transfer wealth or exit an investment in the next 12–18 months?
Strategies such as trust restructuring, asset relocation, or timing the sale of appreciated assets may help reduce your state-level burden.
These changes in Washington are a reminder of how quickly tax environments can shift—and why proactive, relationship-centered planning is more important than ever.
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