Washington
Reviewed June 2026Federal §453 conformity
Washington has no income tax, but since 2022 it has something a business seller cannot ignore: an excise on long-term capital gains, currently 7% above an inflation-adjusted threshold (roughly $280,000 per year) and 9.9% on gains over $1 million in a year. The excise piggybacks on the federal numbers, so installment gain shows up year by year as you recognize it federally — which means, as in Massachusetts, the payment schedule manages the thresholds. Spreading a $3 million gain across six years can keep each year under the $1 million tier, or even under the standard deduction entirely.
Nonresident sourcing
The excise reaches individuals, and allocation follows two different rules: gain from tangible property turns on where the property was located, while gain from intangibles — including stock — turns on where the seller was domiciled at the time of the sale. That makes the seller's domicile on closing day, not in the payment years, the controlling fact for a stock deal.
Withholding
No withholding applies — the excise is paid with an annual return, and estimated payment habits from the income-tax world translate directly.
Selling, then moving (residency change)
The moving question runs both directions here and the timing rule is unusual. For a stock or other intangible sale, what matters is domicile on the day of sale: a Washington resident who sells and then moves still owes the excise on every later payment, while someone who genuinely establishes domicile elsewhere before selling owes none of it — and a seller who moves to Washington after closing an out-of-state intangible sale does not import the gain. For Washington real estate the question never arises, because real estate gain is exempt outright.
Pass-through entity (PTE) tax election
There is no PTE election because there is no income tax to work around — the excise applies at the individual level. Owners of multistate entities paying other states' PTE taxes get the federal deduction; nothing happens on the Washington side.
Estate and IRD
Washington's estate tax is among the steepest in the country — the exclusion sits near $3 million and top rates now reach 35% — and an installment note counts at full value. A seller who used the excise's deductions and exemptions well during life can still hand the note to an estate-tax problem at death. The two regimes do not coordinate; the planning has to.
Planning notes
Washington analysis starts with what is being sold. Real estate: exempt, full stop. A qualifying family-owned small business: a dedicated deduction may wipe out the excise — many Main Street deals walk through that door. Everything else: design the payment schedule against the annual threshold and the $1 million tier, fix domicile before the sale rather than after, and run the estate projection early given the $3 million exclusion and 35% top rate.
Washington exempts real estate gain entirely and offers a deduction that can eliminate the excise for qualifying family-owned small businesses. For many Main Street sales, the right answer is zero — confirm asset class and the business-size tests before designing the schedule around a tax that may not apply.
For stock and other intangible sales, Washington allocates the gain based on where the seller was domiciled when the sale closed. Moving away afterward does not stop the excise on remaining payments — and moving away the year before, done genuinely and documented, stops all of it.
Educational information, current as of the June 2026 review. State law changes; confirm treatment with a qualified advisor before structuring a transaction.
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