On Friday, March 24, 2023, the Washington Supreme Court issued a ruling on the capital gains tax enacted in 2021. In a 7-2 ruling in the Quinn v Washington State case, the court ruled that the new tax is an excise tax, and as a result is constitutional under State law. The tax was effective beginning January 1, 2022, applicable to individuals with long-term capital gains allocable to Washington, with first tax payments due next month.
The tax is a 7% tax on net long-term capital gains in excess of $250,000 per calendar year on each individual or married couple with capital gains derived from tangible property within the State and gains from intangible assets for those domiciled in Washington. The starting point for determining subject long-term capital gains is the amounts reported on your federal individual income tax return.
There are several exemptions, deductions, and credits available. Please find additional information on the tax at: https://www.shannon-cpas.com/wa-state-capital-gains-tax/.
Only those taxpayers who owe the tax in a given year are required to file. Taxpayers subject to the tax need to be prepared to file and pay the tax by April 18, 2023. A taxpayer must set up a Secure Access Washington (SAW) account and create a Capital Gains Account on the Department of Revenue (DOR)’s filing portal. Users then have the ability to grant access to others, including tax practitioners.
We will continue following updates on the tax, as additional legal challenges are expected, including the likelihood of a voter initiative. Please contact Shannon & Associates LLP with any questions.