How to avoid capital gains tax in Washington?

Taxpayers cannot make the Washington capital gains tax disappear with a trick. The optimal action is to check if your sale falls outside the state's rules. If the sale is taxable, the transaction can be planned, and less of the profit gets taxed.

What does Washington’s capital gains tax apply to?

This tax applies to long-term profits linked with Washington from selling specific financial assets & business interests. The state uses the federal long-term capital gains as a baseline and then applies its own specific adjustments.

Which sales are already outside Washington’s tax?

Real estate sales do not fall under Washington’s capital gains tax — even if taxpayers report profit on the federal return.

The state also excludes other transaction types, containing retirement account activities & specific sales related to farming & ranching, timber and fishing.

What can you do to lower taxable Washington gains?

When a sale is taxable, you save the most money by making decisions before you sign the final documents. Here are a few options to discuss with your tax advisor:

Planning	Function
Claim investment losses	Realizing losses in the same tax year might lower the taxable amount
Divide sales across two tax years	This keeps more of the profit in a lower state tax bracket
Donate assets that gained value	A charity receives the asset & you do not have to claim the built-in profit.
Set up an installment sale — if permitted	Taxpayer claims the profit over multiple years instead of all at once
Apply credits for taxes paid to other states	In some situations — this stops the same profit from being taxed twice
Check ownership & sourcing and allocation	This matters for pass-through businesses & situations containing multiple states

What are Washington’s rates and thresholds for 2025?

For the 2025 tax year, Washington applies two rates to taxable capital gains: 7% on the 1st $1,000,000, and 9.9% on anything above that amount.

The state also presents a standard deduction that adjusts for inflation. For 2025, the deduction is $278,000.

Taxable Washington capital gains	Rate
$1 to $1,000,000	7.0%
$1,000,001 and above	9.9%

Does this planning impact the federal capital gains tax?

Not always. Washington has distinct rules from the IRS. Asset sales generally still require federal reporting practice. They are usually completed on Form 8949 & carried over to Schedule D.

When should you look for a CPA?

Taxpayers should contact a tax professional when the scenario has the potential to impact the tax bill as exemplified below:

Selling a large amount of stock or a business interest
Owning assets through an LLC, partnership or S corporation
Holding cryptocurrency for more than 1 year
Setting up an installment sale or using non-cash payments
Having questions about where the profit is sourced or allocated

Helium Day Tax & CPAs can present aid

Our team at Helium Day Tax & CPAs is ready to review transactions, recognize what Washington taxes (and what it does not), and manage state & federal reporting obligations. Reach out to us today before filing.

How to Avoid Capital Gains Tax in Washington