Washington Administrative Code › Title 458 - Revenue, Department of › Chapter 458-20 - Excise tax rules › GENERAL RULE: TAX AVOIDANCE › Section 458-20-300 - Capital gains excise tax-Overview and administration

Current through Register Vol. 24-14, July 15, 2024
(1)
Introduction and overview.
Beginning January 1, 2022, Washington law imposes an excise tax on individuals
				with sales or exchanges of long-term capital assets (capital gains excise tax).
				See RCW
				82.87.040. This rule provides information
				regarding the administration of the capital gains excise tax and is divided
				into six subsections as follows: Introduction and overview; returns;
				extensions; payment of tax; penalties and interest; and general administration.
(a)
Imposition.
The capital
				gains excise tax is imposed on the sale or exchange of long-term capital
				assets. The capital gains excise tax is not imposed on any sale or exchange
				occurring prior to January 1, 2022. A "long-term capital asset" is a capital
				asset that is held for more than one year. A "capital asset" has the same
				meaning as provided by section 1221 of the federal Internal Revenue Code and
				includes any other property if the sale or exchange of the property results in
				a gain that is treated as a long-term capital gain under section 1231 or any
				other provision of the federal Internal Revenue Code.
(b)
Who is taxable?
Only
				individual natural persons (referred to in this rule as "taxpayer," "you," or
				"your") are subject to the capital gains excise tax.
(c)
What is the tax rate?
The
				tax rate is seven percent. The tax is calculated by multiplying a taxpayer's
				Washington capital gains by the seven percent tax rate.
(d)
Washington capital gains.
Washington capital gains is your federal net long-term capital gain with
				certain adjustments made under
				RCW
				82.87.020(1)(a) through (e)
				and further modified by the deductions in
				RCW
				82.87.060. The adjustments are primarily
				aimed at removing capital gains and losses allocated to places outside of
				Washington from your Washington capital gains figure.
(i) "Federal net long-term capital gain"
				means the net long-term capital gain reportable for federal income tax
				purposes, determined as if Title
				26 U.S.C. Secs.
				55 through
				59 and
				1400Z-1 and
				1400Z-2 of the federal Internal
				Revenue Code did not exist. Title
				26 U.S.C. Secs.
				55 through
				59 relate to the alternative
				minimum tax and Title 26
				U.S.C. Secs. 1400Z-1 and
				1400Z-2 relate to
				opportunity zones.
(ii) The
				deductions in
				RCW
				82.87.060 are as follows:
(A) A standard deduction. If you are married
				or a state-registered domestic partner, the total combined standard deduction
				for both you and your spouse or domestic partner is $250,000, regardless of
				whether you and your spouse or domestic partner file a joint or separate
				return. In all other cases, the standard deduction is $250,000 per individual
				natural person. The $250,000 deduction amount may be adjusted for inflation
				every December, beginning in December 2023. See
				RCW
				82.87.150 for additional
				information.
(B) Amounts that the
				state is prohibited from taxing under the Constitution of this state or the
				Constitution or laws of the United States.
(C) Adjusted capital gain derived from the
				sale or transfer of your interest in a qualified family-owned small business
				pursuant to
				RCW
				82.87.070.
(D) Charitable donations deductible under
				RCW
				82.87.080. The charitable donation deduction
				cannot exceed $100,000. The $100,000 deduction cap may be adjusted for
				inflation every December, beginning in December 2023. See
				RCW
				82.87.150 for additional
				information.
(e)
Exemptions.
Certain sales or
				exchanges, such as sales of real estate, are exempt from the capital gains
				excise tax. See
				RCW
				82.87.050 for additional
				information.
(f)
Examples.
This rule contains examples. These examples identify a
				number of facts and then state a conclusion. They are provided only as a
				general guide. The tax results of other situations must be determined after a
				review of all the facts and circumstances.