Understanding Washington State’s Transfer Tax: A Quick Guide
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Joseph Gordon EditorJoseph Gordon is an Editor with HomeLight. He has several years of experience reporting on the commercial real estate and insurance industries.
Understanding real estate transfer taxes is essential if you’re selling your home in Washington State. Transfer taxes, also known as the real estate excise tax in Washington state, are fees imposed by the state, county, or city governments when property ownership is transferred from one party to another.
We’ll cover who is responsible for paying these taxes, the different types of transfer taxes you might encounter, and what you can expect to pay when selling your property.
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Disclaimer: This post is for educational purposes only and does not constitute legal or financial advice. Links and mentions of Washington State area tax services or attorneys should not be considered endorsements.
What are transfer taxes?
According to the Federal Trade Commission, transfer taxes are state or local taxes due when property ownership is transferred from one party to another. When you transfer the title of your home—the official legal right to the property—to a buyer, a tax is levied by the government on this transaction.
The amount you owe in transfer taxes depends on where your property is located, as state, county, and city regulations vary. These taxes are intended to generate revenue for the government, similar to other types of taxes. Understanding the specifics of transfer taxes in Washington State will help you prepare for the financial aspects of selling your home.
Who pays for transfer taxes?
The ultimate responsibility of who pays for a state, city, or county’s transfer tax will vary based on location.
In Washington State, it is referred to as a real estate excise tax (REET), and the seller is responsible for it; however, if the tax is not paid, it becomes the buyer’s responsibility.
Unpaid taxes can also become a lien on the property in question, so it’s important to work this out in your seller agreement and, if you are the seller, ensure that the tax is paid promptly.
What are the types of transfer taxes?
Transfer taxes will change based on city, county, or state guidelines. For the REET in Washington, as of 2020, totals are calculated based on a sales price threshold of the property, which are taxed at different percentages based on the total amount the property sells for.
There are also local county percentages to consider, which are combined with the state totals to determine the full amount. These local guidelines went into effect in April 2024.
For example, in Spokane County, a REET of 0.50% is assessed, combined with the state’s graduated amount, which is calculated based on the sale amount.
Here’s a look at the state’s tax rates.
State transfer taxes
- Effective date: Jan. 1, 2020
- Structure: Graduated based on selling price
- Calculation: Total tax = State portion + Local portion
Graduated REET structure
- Sale price thresholds and tax rates:
- $500,000 or less: 1.10%
- $500,000.01 – $1,500,000: 1.28%
- $1,500,000.01 – $3,000,000: 2.75%
- $3,000,000.01 or more: 3%
For example, if a property in Spokane County sold for $500,000, the total REET assessed would be $5,500 (1.10% from the state) + $2,500 (0.50% from Spokane guidelines) = $8,000.
Other transfer fees
In addition to transfer taxes, there are possible fees to consider, such as from a homeowner’s association or another local neighborhood organization. Again, as these can vary heavily based on location, it’s important to consult a professional.
If you’re selling your home for sale by owner, consulting a professional might help with some of the finer points of the process and give you a better idea of what you can expect.
Are transfer taxes deductible?
Transfer taxes are not deductible on your income tax return. However, you can potentially reduce your capital gains tax.
Capital gains, which are the profits made from selling your home, are subject to federal taxes just like profits from other assets. The IRS allows sellers to treat transfer taxes as selling costs. This means you can subtract the transfer taxes from your home’s closing sale price, thereby reducing the capital gains taxes owed on the profit earned from the sale.
Transfer tax exemptions
Some Washington State sellers might be eligible for exemptions from transfer taxes, depending on their location. Here are some key points:
- Exemptions for specific properties:
- Agricultural land and timberland: Flat state REET rate of 1.28%
- Local REET rates remain unchanged
- Common REET exemptions:
- Gifts
- Inheritance or devise
- Community property, dissolution of marriage, or domestic partnership
- Tenants in common and joint tenants
- Governmental transfers
- Condemnation proceedings
- Bankruptcy
- Foreclosure-related transfers
- Rescission of sale
- Irrevocable trusts
- Family corporations and partnerships
- IRS “tax deferred” exchange
- Low-income housing
- Housing for developmentally disabled persons
- Self-help housing
- Affordable housing
Estimating transfer taxes for your home sale
For a quick estimate of what you’ll make from selling your Washington State home, try HomeLight’s Net Proceeds Calculator. This tool considers your closing costs, including transfer taxes, agent fees, and any renovations, to provide a clear picture of your financial outcome.
For a more precise assessment of your transfer taxes and other closing expenses, it’s a good idea to consult a top real estate agent. These costs, often assumed to be the buyer’s or seller’s responsibility, can be negotiated based on the market conditions. It’s important to discuss these taxes early in your real estate transaction so that you can get a better idea of what you will be responsible for and how it will impact your bottom line.
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