SB 5314 - Modifying the Capital Gains Tax - As Passed Senate, March 3, 2025

Sep 19, 2026

Senate Bill Report SB 5314, as passed by the Senate on March 3, 2025, modifies Washington’s capital gains tax under RCW 82.87 and related statutes. It closes loopholes, replaces the business and occupation tax credit with a capital gains tax credit, clarifies ambiguities, and makes technical corrections without affecting state or local collections. The bill also adjusts credits for taxes paid elsewhere, harmonizes treatment of spouses and domestic partners, updates definitions, changes inflation adjustment publication timing, alters distributions, adds a nonclaim period, and introduces a new broker and barter exchange requirement.

LanguageEnglish

CategoryGeneral

FormatPDF

Pages5

Reading Time2 min

AccessFree to download

Brief Description

Sponsors and Committee/Floor Activity

Brief Summary of First Substitute Bill

Background: Current CGT Framework

Tax Imposition and Filing Requirements

Exclusions and Deductions

Revenue Distribution Rules

SENATE BILL REPORTSSB 5314 As Passed Senate, March 3, 2025 Title: An act relating to modifying the capital gains tax under chapter 82.87 RCW and related statutes by closing loopholes, replacing the business and occupation tax credit with a capital gains tax credit, clarifying ambiguities and making technical corrections in a manner that isnot estimated to affect state or local tax collections, modifying the credit for taxes paid in other jurisdictions, treating spouses and domestic partners more consistently, modifying and adding definitions, creating a late payment penalty waiver, modifying the publication schedule for inflation adjustments, modifying the distributions of moneys to the following fiscal year instead of calendar year, adding a nonclaim period, and adding a new requirement for brokers and barter exchanges. Brief Description: Modifying the capital gains tax. Sponsors: Senate Committee on Ways & Means (originally sponsored by Senators Stanford, Harris and Nobles; by request of Department of Revenue) . Brief History: Committee Activity: Ways & Means: 1/28/25, 2/18/25 [DPS, DNP, w/oRec] . Floor Activity: Passed Senate: 3/3/25, 30-19. Brief Summary of First Substitute Bill • Makes various technical clarifications, corrections, and administrative changes to the Washington capital gains tax. SENATE COMMITTEE ON WAYS & MEANS Majority Report: That Substitute Senate Bill No. 5314 be substituted therefor, and the substitute bill do pass. Signed by Senators Robinson, Chair; Stanford, Vice Chair, Operating; Trudeau, Vice Chair, Capital; Frame, Vice Chair, Finance; Cleveland, Conway, Dhingra, Hansen, This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not part of the legislation nor does it constitute a statement of legislative intent. Senate Bill Report -1- SSB 5314 Hasegawa, Kauffman, Riccelli, Saldaña, Wellman and Wilson, C.. Minority Report: Do not pass. Signed by Senator Dozier, Assistant Ranking Member, Capital. Minority Report: That it be referred without recommendation. Signed by Senators Gildon, Ranking Member, Operating; Torres, Assistant Ranking Member, Operating; Schoesler, Ranking Member, Capital; Boehnke, Muzzall, Pedersen, Wagoner and Warnick. Staff: Jeffrey Mitchell (786-7438) Background: Beginning January 1, 2022, an annual state net capital gains tax (CGT) was imposed on the sale or other voluntary exchange of long-term capital assets by individuals. The tax rate is 7 percent. The tax rate is applied to the capital gains amount reported on the individual's federal income tax return. For resident individuals, all capital gains from the sale or exchange of intangible personal property, such as stock, are allocated to Washington State. Capital gains from the sale or exchange of tangible personal property are allocated to Washington if the property was located in Washington at the time of the transaction. All taxpayers must file with the state Department of Revenue (DOR), a CGT return for each taxable year; however, a person with no tax liability is not required to file a tax return. The due date of the state CGT return is the due date for the federal income tax return, unless otherwise required by DOR. The first state CGT returns were due in 2023. Taxpayers owing tax must also file a copy of their federal tax return. The first $270,000 of capital gains are excluded from the state CGT. The threshold is adjusted each year for inflation. Sales or exchanges of some capital assets are explicitly excluded from the state CGT, including: • all real estate—land and structures; • interests in a privately held entity to the extent any long-term capital gain or loss is directly attributable to the real estate owned directly by the entity; • assets held in a retirement account; • assets transferred as part of a condemnation proceeding; • livestock related to farming or ranching; •

FAQs

What does SB 5314 primarily change about Washington’s capital gains tax?

It modifies the capital gains tax by closing loopholes, replacing an existing tax credit, clarifying terms, and making technical corrections while specifying related credit, timing, and distribution changes.

When was the Senate version of SB 5314 passed?

The report states it was passed by the Senate on March 3, 2025 (30-19).

How are the capital gains tax revenues distributed under the described framework?

The first $525 million of annual CGT revenues are deposited into the state Education Legacy Trust Account, with the remainder deposited into the Common School Construction Account, with the associated threshold adjusted for inflation.

Sep 19, 2026

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