Key Updates to What’s Changing in Washington’s Estate and Capital Gains Taxes

Authored by Ben Spruch, Stokes Lawrence

Fast-moving changes to Washington State’s estate tax and capital gains tax may reshape estate planning priorities for many Washingtonians going forward. Recently, Governor Ferguson signed into law Engrossed Substitute Bill 5813 (ESSB 5813). Described as “[a]n act relating to increasing funding to the education legacy trust account for public education, childcare, early learning, and higher education by creating a more progressive rate structure for the capital gains tax and estate tax,” the law substantially impacts Washington’s capital gains tax and estate tax rates and exemption.

Washington Capital Gains Tax
The law change applies an additional 2.9 percent excise tax on capital gains over $1 million from the sale of long-term capital assets in Washington. This new tax is layered on top of Washington’s existing 7 percent tax on capital gains of $1 million or less, resulting in a combined 9.9 percent tax rate on capital gains exceeding $1 million. The tax will be applied retroactively to sales or exchanges occurring on or after January 1, 2025.

Washington Estate Tax
ESSB 5813 also impacts Washington’s estate tax.

First, the individual Washington estate tax exemption amount is increased from $2.193 million to $3 million for persons dying on or after July 1, 2025. The law also provides updated guidance on annual inflation adjustments to the estate tax exemption beginning in 2026.

Second, the law increases Washington estate tax rates for persons dying on or after July 1, 2025. The changes significantly impact the tax due on taxable estates (i.e., those estates exceeding the Washington exemption amount), as demonstrated in the table below:

To see the impact of these changes, consider the change in Washington estate tax owed on a $15 million Washington estate for a person dying on June 30 versus July 1:

Finally, the legislation increases Washington’s qualified family-owned business interests deduction to $3 million. It also establishes that a “qualified nonfamilial heir¹” may take estate tax deductions relating to inherited farms and farming equipment.

As with any tax law change, the impact will vary depending on your individual circumstances. We suggest reviewing these updates with your legal and tax advisors to determine what they mean for you.

About Ben Spruch

Ben Spruch is an attorney in Stokes Lawrence’s Estate Planning and Administration practice, where he partners with financial advisors and their clients to develop integrated strategies that align tax law with legacy planning and long-term financial goals. He works closely with individuals and families to design customized estate plans, navigate complex trust and probate matters, and implement business succession strategies—all with a collaborative approach that reflects each client’s unique values and priorities.

Ben Spruch, Of Counsel, Stokes Lawrence

¹ “Qualified nonfamilial heir” means an employee of a farm who materially participated in the operation of the farm.