Washington State 2025 Tax Legislation Updates: What Individuals Need to Know

The 2025 Washington State legislative session introduced key tax law changes that directly affect individual taxpayers, especially high earners, investors, and residents making large purchases or out-of-state transactions. Understanding how these laws impact your finances is critical. At the Law Office of Theresa Nguyen, PLLC, we help Washington residents prepare for and adapt to new tax obligations before they become liabilities.

💸 Capital Gains Tax Rate Increase

Effective for 2025 Tax Year

• The Washington State capital gains tax rate increases from 7% to 9.9% for annual long-term capital gains exceeding $1 million.

• Gains under $1 million remain subject to the original 7% rate.

• The standard deduction continues to apply (adjusted for inflation each year).

⚠️ This change primarily affects individuals planning to sell real estate, stocks, business interests, or other long-term investments.

✅ What to Do:

• Time asset sales across tax years to manage liability.

• Consider installment sales or 1031 exchanges (where applicable).

• Work with a tax advisor to explore legal offset strategies.

🧰 Clarification on Capital Gains Deductions and Credits

• The Business & Occupation (B&O) tax credit previously available for income taxed under capital gains is replaced with a direct capital gains tax credit.

• Only capital losses incurred in 2022 or later may offset current Washington capital gains.

🔹 Pre-2022 capital loss carryforwards are not allowed for WA capital gains tax.

✅ What to Do:

• Update your records to reflect eligible losses.

• Confirm whether any state-level credits apply to your 2025 return.

• Plan ahead for future offsets by strategically timing sales and losses.

👛 Individual Use Tax Reminder

• Washington requires use tax to be paid on out-of-state or online purchases when no sales tax is collected.

• Applies to untaxed items such as:

  • Artwork, collectibles, and electronics

  • Clothing or furniture purchased from online retailers without nexus in WA

🔧 This is not a new tax, but enforcement and audit focus may increase due to broader retail tax base changes.

✅ What to Do:

• Maintain receipts and invoices from out-of-state purchases.

• Calculate use tax on large personal purchases when filing your return.

• Consider preemptively paying use tax when appropriate to avoid interest and penalties.

🧠 Why These Changes Matter for Individuals

Whether you're an investor, retiree, or simply buying high-value goods, these new rules can increase your annual tax burden.

✅ Suggested Next Steps:

• Review your investment portfolio with a tax professional.

• Consult an estate planning attorney before selling major assets.

• Track your out-of-state and online purchases for use tax compliance.

👩‍⚖️ How the Law Office of Theresa Nguyen, PLLC Can Help

Our firm helps individuals across King County and Washington State:

• Minimize capital gains tax exposure

• Navigate high-income tax planning

• Ensure use tax compliance

• Strategize asset transfers and gifting

📍 Located in Renton, WA
📞 Schedule your consultation today to prepare for Washington’s evolving tax landscape.

Other Articles About the Washington State 2025 Tax Legislation

Washington State 2025 Tax Legislation Updates: General Taxes (Sales, Use, and Excise)

Washington State 2025 Tax Legislation Updates: Estate and Gift Tax Changes

Washington State 2025 Tax Legislation Updates: What Business Owners Should Know