On May 4th, Governor Jay Inslee of Washington signed Senate Bill 5096 (SB 5096)—a highly contested piece of legislation—into law. The bill contains a state capital gains tax on Washington residents.
In a recent article from the Seattle Times, political reporter Jim Brunner offers a helpful overview of the new state tax law. Details of the new capital gains tax legislated in SB 5096 include the following:
- The new tax is a flat 7% tax of net long-term capital gains.
- It applies to profits greater than $250,000 from the sale of investments.
- Real estate accounts, retirement accounts, and timber and livestock sales are exempt.
- The bill establishes certain deductions for smaller, family-owned businesses.
- The new tax goes into effect for fiscal year 2023.
In light of the parameters listed above, experts estimate that approximately 7,000 Washington residents will be required to pay the new capital gains tax. The Washington Department or Revenue expects to bring in about $445 million as a result of the new tax.
The bill containing the new capital gains tax passed narrowly in the state Senate—the vote was 25-24. It is expected that legal challenges to the legislation will be pursued in court by a number of parties, including the Freedom Foundation and the Opportunity for All Coalition.
For additional details, click here for a helpful article covering common questions about the new legislation.