Washington Capital Gains Tax Rate (2026)
Washington capital gains tax overview
Washington enacted a capital gains tax in 2021 on long-term gains above $262,000 (2026 threshold, inflation-adjusted). The tax is 7% on gains from $262,000 to $1,000,000 and 9% above $1,000,000. Gains below the threshold are exempt. Washington has no general income tax.
Federal + Washington combined rates
Your total capital gains tax bill includes both layers — federal and state. Here is what a Washington investor pays in 2026 for long-term gains:
| Federal Long-Term Rate | Washington State Rate | Combined Rate | Plus NIIT (if applicable) |
|---|---|---|---|
| 0% | 9% | 9% | 12.8% |
| 15% | 9% | 24% | 27.8% |
| 20% | 9% | 29% | 32.8% |
The NIIT (Net Investment Income Tax) adds an extra 3.8% for taxpayers whose MAGI exceeds $200,000 (single) or $250,000 (married filing jointly). It is a federal tax only — Washington does not have an equivalent.
How Washington compares to other states
Washington's top rate of 9% places it among the highest-taxed states for capital gains. For comparison:
- Zero-tax states (FL, TX, NV, etc.): 0% — total with 15% federal = 15%
- Low-rate states (AZ, IN, PA): 2.5–3.1% — total with 15% federal = 17.5–18.1%
- Washington: 9% — total with 15% federal = 24.0%
- High-rate states (NY, NJ): 10.75–10.9% — total with 15% federal = ~26%
- California: 13.3% — total with 15% federal = 28.3%
Tax-reduction strategies for Washington residents
With a top state rate of 9%, minimizing capital gains tax is particularly important in Washington. Key strategies:
- Hold over 1 year for long-term federal rates (0/15/20%).
- Tax-loss harvesting: Offset your gains with losses realized in the same year. A $20,000 loss offsets $20,000 of gains dollar-for-dollar, saving up to 29% ($5,800) on that $20,000 at top rates.
- 0% bracket planning: In lower-income years (retirement, sabbatical, between jobs), realize gains at the federal 0% rate. You still owe Washington state tax, but eliminating the federal component is significant.
- Donate appreciated stock directly to charity or a donor-advised fund to avoid capital gains tax entirely while generating a charitable deduction for the full fair market value.
- Installment sales: If selling a business or real estate, structuring as an installment sale spreads the gain over multiple years, potentially keeping each year's gain in a lower bracket.
Detailed Washington capital gains tax rules
Tax history and legal basis
Washington enacted a 7% capital gains tax in 2021 (upheld by the WA Supreme Court in 2023). It applies only to long-term gains exceeding $262,000 per year.
Exemptions and special treatment
The first $262,000 (2026, inflation-adjusted) of annual long-term capital gains is EXEMPT. Only gains above this threshold are taxed. Additionally, gains from retirement accounts, real estate, livestock, timber, and goodwill from selling a family-owned small business are exempt. Short-term gains are NOT subject to this tax.
Filing requirements
File the Washington Capital Gains Tax Return (through the Department of Revenue, not a traditional income tax form). Only required if gains exceed $262,000. Due April 15. The tax is collected as an excise tax, not an income tax (this classification is what allowed it to survive court challenge).
Recent changes and legislative updates
Starting in 2025, gains over $1 million face a 9% rate (up from 7%). The $262,000 exemption is indexed for inflation. A ballot measure to repeal the tax was blocked from the 2023 ballot. Washington remains one of only a few states that taxes capital gains but NOT wages — the reverse of most states.
Worked example: $3,00,000 capital gain in Washington
Here's exactly what a Washington resident would owe on a $3,00,000 long-term capital gain with $2,00,000 in other income (single filer, 2026):
| Component | Amount | Notes |
|---|---|---|
| Capital gain | $3,00,000 | Long-term (held over 1 year) |
| Federal tax (15%) | −$45,000 | Based on $2,00,000 ordinary income + gain |
| Washington state tax (7%) | −$2,660 | Applied to the full gain amount |
| Total tax owed | −$47,660 | Federal + state combined |
| You keep | $2,52,340 | 84.1% of your gain |
After both federal and Washington state tax, you keep $2,52,340 of your original $3,00,000 gain. The effective combined rate is 15.9%. This is significantly higher than the national average — consider tax-loss harvesting or timing strategies to reduce your bill.
Frequently asked questions — Washington
Does Washington tax short-term and long-term gains differently?
Yes, Washington provides some preferential treatment for long-term capital gains. Washington enacted a capital gains tax in 2021 on long-term gains above $262,000 (2026 threshold, inflation-adjusted). The tax is 7% on gains from $262,000 to $1,000,000 and 9% above $1,000,000. Gains below the threshold are exempt. Washington has no general income tax.
Do I need to file a Washington tax return if I only have capital gains?
If you have capital gains income and meet Washington's filing threshold, you are required to file a Washington state income tax return. The threshold is typically similar to the standard deduction amount — check the WA Department of Revenue for the current year's filing requirements.
What if I moved to Washington mid-year?
If you moved to Washington during the year, you are a part-year resident. Washington generally taxes capital gains realized while you were a Washington resident. Gains realized before you moved may be taxable by your prior state. Keep detailed records of when each sale occurred relative to your move date.