On March 24, the Washington Supreme Court ruled 7-2 to UPHOLD Washington’s 7% tax on the sale of assets that generate capital gains in excess of $250,000 in a calendar year.
The tax took effect on January 1, 2022, and the first payments are due on or before April 18, 2023.
See below for links to the state’s very helpful website addressing the tax’s applicability, today’s court opinion (majority and dissent), and our top-level overview of what you should do “now.”
We will analyze the opinion and provide a more detailed client advisory and summary in the coming days, including for how this opinion might apply if the Legislature passed a generally applicable income tax.
________________________________________
For now, please consider if you may owe this tax and have a filing requirement due April 18, 2023 for capital gains generated from sales that you made during 2022.
➤ Note the key word sales. This tax does not apply to unrealized gains on assets that are not sold.
➤ This will require analysis by your financial advisor and/or CPA, if you’re unsure if “your” capital gains are the kind that are “taxable” capital gains.
➤ Please note that this tax is not applicable to gains from real estate sales or to gains generated inside retirement accounts like IRAs and 401(k)s.
More immediate information is available on this State of Washington website: https://dor.wa.gov/taxes-rates/other-taxes/capital-gains-tax.
➤ If you scroll down on that page, you will see boxes to expand for Exemptions, Deductions, and Credits that you will find very helpful.
➤ These boxes will likely address the majority of your questions now that this tax is affirmed and fully effective.
➤ Also review the information and links on the right-hand side of the webpage under “Additional resources.”
Please contact us if you or your CPA or financial advisor need assistance determining applicability of this tax to a given asset sale.