February 8, 2023
The State of Washington has enacted a 7% Capital Gains Tax due to be paid on or before April 18, 2023.
Several exemptions apply, and there is a $250,000 deduction that applies to individuals and married couples, making the tax primarily applicable to Washington residents with high capital gains income. See https://dor.wa.gov/taxes-rates/other-taxes/capital-gains-tax
The enforcement of this tax law has been contested in the courts since its original passage in 2021 and is still in limbo. Along with the impending deadline for compliance, the Washington Supreme Court heard oral arguments in late January 2023 regarding whether or not the tax is constitutional. Several interesting legal theories could apply to an eventual court decision on the matter, and they are discussed here: https://www.washingtonpolicy.org/publications/detail/capital-gains-income-tax-case-three-possible-rulings
The Washington Department of Revenue has published instructions showing how affected taxpayers may register for a capital gains tax account, file a tax return, and remit taxes to the State. See https://dor.wa.gov/manage-business/my-dor-help/capital-gains-my-dor-help. It is not known when the Washington Supreme Court will decide on the legality of this tax. Still, we recommend that those affected should wait until April 18 to file the returns and pay the tax because there is a distinct possibility that the tax may never become due.
DISCLOSURE:
Investment advisor representative of securities and investment advisory services offered through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker/dealer, and Registered Investment Advisor. Cetera is under separate ownership from any other named entity. In addition, some Investment advisory services are offered through Fulcrum Wealth Advisors, LLC. Fulcrum Wealth Advisors, LLC is a registered investment advisor in the State of Washington. Branch Address: 10940 NE 33rd PL., #210 Bellevue, WA 98004 Branch Phone: 877-400-0260
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