An Update on Washington State’s Long-Term Capital Gains Tax

Liting Chuang, CPA. March 16, 2023

In 2021 the Washington State Legislature passed ESSB 5096 (RCW 82.87) which created 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 became effective January 1, 2022, with the first payments for the 2022 tax year due on or before April 18, 2023.

Groups opposed to the tax have since sued, arguing that the legislation represents an unconstitutional attempt to pass an income tax, a determination upheld in March of 2022 by Douglas County Superior Court. In January of this year, the case reached the Washington Supreme Court and a decision from the court is expected in the coming months.

Below are the key components of the legislation.

Tax rate:

    • 7% on net long-term capital gains (LTCGs) in excess of $250,000 standard deduction and limited charitable donation deduction in a calendar year.
      • In case of married taxpayers, standard deduction is limited to $250,000 whether taxpayers filed jointly or separately.
    • Amount is based on federal LTCGs reported.

Due date:

    • Tax took effect on January 1, 2022, payment is due on or before April 18, 2023. If the taxpayer has obtained an extension to file their federal return, the same extension applies for WA capital gains tax filing. Payment is still due on April 18th.
    • A taxpayer that knowingly attempts to evade tax is guilty of a felony.
    • A taxpayer that knowingly fails to pay the tax or file the return is guilty of a misdemeanor.
    • Penalties will be imposed on late returns and late payments.

Estimated tax payments:

    • Not required for 2023.

Filing & Remittance:

    • File and pay via Department of Revenue’s online tax portal; instructions can be found here.
    • Only taxpayers that owe the tax are required to file a return.


Sale of the following are exempt from WA capital gains tax. Taxpayer claiming an exemption should retain proper documentation.

    • Real estate.
    • Assets held in retirement accounts.
    • Assets condemned by the government.
    • Depreciable property used in a trade or business.
    • Sale of a “qualified” family-owned business.
    • Goodwill from sale of a franchised auto dealership.
    • Certain livestock or timber sales.

As of this posting, there is not a formal ruling. If the law is eventually found to be unconstitutional, any tax payments submitted will be refunded to the taxpayer with interest. Bordeaux Wealth Advisors is monitoring the legislation closely; to learn more contact your BWA service team or your CPA. You can also utilize these official information sources: WA DOR and DOR FAQ.


The material has been gathered from sources believed to be reliable, however BWA cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. This article is not intended to provide tax or legal advice, and nothing contained in these materials should be taken as such. To determine which strategies may be appropriate for you, consult your tax and financial professionals. Investment Advisory services are offered through Bordeaux Wealth Advisors, LLC. Advisory services are only offered where Bordeaux and its representatives are properly licensed or exempt from licensure. No advice may be rendered unless a client agreement is in place.