Graduated tax rates on real estate sales started January 1, 2020
January 6, 2020
Starting January 1, a graduated excise tax rate for real estate sales replaces a flat 1.28% state rate. The tiered tax is based on the selling price of property sales occurring on or after January 1, 2020 (ESSB 5998).
The new legislation does not affect the sale of undeveloped land, timberland, agricultural land, and water or mineral rights, regardless of selling price. Those transactions will still be subject to REET at a 1.28% state tax rate.
The new graduated REET structure is as follows:
|Sale Price Thresholds||Tax Rate|
|$500,000 or less||1.10%|
|$500,000.01 - $1,500,000||1.28%|
|$1,500,000.01 - $3,000,000||2.75%|
|$3,000,000.01 or more||3%|
In addition to the state real estate excise tax, cities and counties may impose local real estate taxes. Two main REET options for these jurisdictions include:
- REET 1, or the "first quarter percent" - a 0.25% REET which may be imposed by any city, town, or county primarily for capital projects and limited maintenance;
- REET 2, or the "second quarter percent" - an additional 0.25% REET which may be imposed by any city, town, or county fully planning under the Growth Management Act, to be used primarily for capital projects and limited maintenance.
As explained in ESSB 5998, REET revenue is distributed for various uses. Beginning January 1, 2020 and ending June 30, 2023, revenue is distributed as follows:
1.7 percent must be deposited in the Public Works Assistance Account;
1.4 percent must be deposited in the City-County Assistance Account;
79.4 percent must be deposited in the general fund; and
the remaining amount must be deposited in the Education Legacy Trust Account.
After June 30, 2023, distributions to the Public Works Assistance Account increase to 5.2%.
More detailed information on REET may be found at:
- The state Department of Revenue website, including an overview of the changes, a tax calculator and local rates for each municipality.
- Northwest MLS member website, which includes a Seller's Net Proceeds calculator (in Financial Tools), which has been updated to reflect the changes, and a flyer with sample calculations (member log-in required).
- The Municipal Research and Services Center (MRSC) website. (MRSC is a statewide, nonprofit resource that provides general legal, finance, and policy guidance to support local government entities pursuant to Chapter 43.110 RCW).