Washington State House Democrats


Capital Gains Excise Tax Collections Lower than Projected

OLYMPIA, WA – Last week, Washington’s Department of Revenue released a report on capital gains excise tax collections for the second year in which the tax has been collected. Washington taxpayers filed 3,850 returns for capital gains, and collections from the tax reached $433 million in tax year 2023.  

The Legislature passed the capital gains excise tax (SB 5096) in 2021, creating a 7% excise tax on the sale or exchange of long-term capital assets such as stocks, bonds, business interests, or other investments and tangible assets. The tax, designed to avoid taxing working families, includes exemptions for all real estate, retirement accounts, livestock, agricultural land, fishing privileges, a qualified family-owned business, and more. For tax year 2023 (taxes due in April 2024), the tax applies after a standard $262,000 deduction of capital gains. It only applies to individuals and to gains allocated within Washington state.  

According to the new law, the first $500 million in revenues from the capital gains excise tax is deposited into the Education Legacy Trust Account annually, and any remainder is deposited into the Common School Construction Account for capital investment.  

“The capital gains excise tax is significant in many ways, but most notably it helps ensure investments in critical areas that support Washington’s families and communities, including childcare, early learning, K-12 education, and more,” said Rep. April Berg, D-Mill Creek, Chair of the House Finance Committee. 

The deadlines for the capital gains excise tax (April 15 and October 16, 2024) do not match Washington’s fiscal year, which ends on June 30. For budget purposes, any refunds and payments made after the fiscal year ends are counted in the next fiscal year. This year, refunds and payments from the first year decreased the total by $62 million, meaning $371 million has been deposited into the Education Legacy account. Based on initial returns, no additional funds are expected for the Common School Construction Account this year. These revenues fall significantly short of those expected in the February 2024 forecast 

“Despite capital gains excise tax revenues coming in lower this year than in 2023, the collections this year are consistent with the Legislature’s estimates when the bill was passed in 2021,” explained Berg.