Article

Washington Legislature passes multiple bills with significant tax changes

May 7, 2025 · Authored by Shannon Bonner, Kelly Nelson

The Washington Legislature passed a series of bills containing significant tax changes during the last week of April and the bills currently sit with the Governor awaiting signature.

The bills contain measures to increase the capital gains tax on high income earners, modify the estate tax, expand the state sales tax, and increase the business and occupations tax on certain industries, among other changes.

Capital gains tax increase

Washington’s capital gains tax was approved in 2021 and effective Jan. 1, 2022. The tax has survived repeal efforts including legal challenges and a statewide ballot initiative this past November.

With the tax being upheld, the Legislature passed changes to the capital gains tax rate beginning Jan. 1, 2025. Specifically, SB 5813 adds a new tier to the state’s capital gains excise tax rate, placing an additional 2.9% tax on the sale or exchange of long-term assets such as stocks, bonds, business interests or other investments above $1 million. This would be on top of the already imposed 7% tax on gains over $270,000 per year, adjusted annually, making the total tax 9.9% on capital gains of over $1 million per year.

Estate tax modifications

Additionally, SB 5813 modifies the estate tax by allowing exclusions up to $3 million in value for estates of decedents dying on or after July 1, 2025, while also indexing the value for inflation in the future. The bill also increases the tax rate on estates, which currently range from 10% to 20% depending on the size of the estate, to 10% to 35% beginning July 1, 2025.

Business and Occupation tax changes

a. Rate changes

HB 2081 (the Legislation) increases the Business and Occupation (B&O) tax on multiple sectors including an increase to common B&O tax classifications such as an increase from 0.484% to 0.5% for standard manufacturing, extracting and wholesaling, and an increase from 0.471% to 0.5% for standard retailing and radioactive waste clean-up.

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.