New Washington Real Estate Excise Taxes Could Affect Home Sellers
If you are selling a home in Washington State, you should pay attention to the new real estate excise tax (REET) law that goes into effect in January 2020. The Washington State Legislature passed a budget this year that includes changes to real estate excise taxes collected on the sale of a house.
Previously, Washington State had a flat tax rate of 1.28% on all sales, regardless of the sale price. The new changes are meant to make the tax rate more progressive by taxing more on wealthier home sellers. Homes sold under $500,000 will see a decrease while those over $1.5 million are more likely to feel the pinch. The changes are as follows:
- Sales up to $500,000: 1.1% (down from 1.28%)
- Sales from $500,000 to $1,500,000: 1.28% tax rate (unchanged and 1.1% marginal rate on first $500k)
- Sales from $1,500,000 to $3,000,000: 2.75% tax rate (marginal rates on amount up to $1.5 million)
- Sales over $3,000,000: 3.0% tax rate (marginal rates on amount up to $3 million)
- Unimproved property (land for development), agricultural land, and timber land: 1.28% rate, regardless of price
As the seller, you are expected to pay these taxes. unless another agreement is reached with the buyer. And, this tax needs to be paid in order to record the deed to transfer the property to the buyer. The good news is it will likely be included on your escrow settlement sheet and facilitated by your representative at closing time.
Money collected via these taxes goes mostly to the general fund. The general fund funds human services and improvements like K-12 education, higher education, DSHS, police, etc. Tax law was also recently changed to allow REET funds to go towards affordable housing projects.