Washington State Estate Tax Is Changing: What to Know
On May 20, 2025, Governor Bob Ferguson signed ESSB 5813 into law, enacting significant changes to Washington’s estate and capital gains tax structures. These reforms will affect many Washington families—particularly those whose wealth is growing toward or beyond state exemption thresholds. Understanding the updates now can help avoid surprises later and support more strategic planning.
Estate Tax Changes
(Effective July 1, 2025)
Exemption Increase:
The Washington estate tax exemption will rise from $2.193 million to $3 million per person. After several years without adjustment, the exemption will once again be indexed to inflation each year—an important shift for families tracking long-term asset growth.
Rate Adjustments:
A more progressive rate structure will be introduced, increasing the top marginal estate tax rate from 20% to 35% for Washington taxable estates exceeding $9 million.
Impact:
Most estates valued below approximately $8.83 million will experience a net tax reduction due to the larger exemption, even with the introduction of higher brackets. However, estates above that threshold could see an increase in tax owed.
National Context:
With this adjustment, Washington now holds the highest state-level estate tax rate in the country. This may put more pressure on high-net-worth households to monitor their estate’s projected growth and evaluate tax exposure over time.
Capital Gains Tax Changes (Effective for Tax Year 2025)
New Top Bracket Introduced:
Washington’s capital gains tax will no longer apply a flat 7% rate across the board. Starting with the 2025 tax year, gains exceeding $1 million will be taxed at 9.9%, while gains below that amount will continue to be taxed at 7%.
This change primarily affects households with significant annual investment gains—such as those from business sales or large stock transactions—and marks a shift toward a more income-sensitive approach to taxing capital gains.
Broader Legislative Context
These reforms aim to increase funding for the Education Legacy Trust Account, which supports public education, childcare, early learning, and higher education in Washington State.
Federal Developments to Watch
Separately, the U.S. House of Representatives recently passed a proposal informally known as the “One Big Beautiful Bill.” Among its many provisions is an increase to the federal estate and gift tax exemption, raising it to $15 million per individual starting in 2026. The bill is now under consideration in the Senate, and we are monitoring its progress closely.
Looking Ahead
Tax policy continues to evolve at both the state and federal level, and these new laws will influence how estates are taxed and how capital gains are treated in Washington going forward. Our team is actively reviewing these developments and adjusting our strategies as needed. We will continue to share updates—both on our website and in future communications—to help you stay informed and confident in your planning.
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