Capital-gains collection starts in April 2023 – The Washington State Supreme Court ruled last week that the Dept. of Revenue (DOR) may collects income from the capital-gains income tax before the Court makes its ruling. As you may recall, a Douglas County judge ruled in March 2022 that the capital-gains income tax was unconstitutional. In November, the Attorney General asked the State Court for a stay of the lower court’s order pending review by the Supreme Court, which was granted — meaning the DOR will be allowed to collect the revenue.
The tax will be imposed at 7% of Washington annual long-term capital gains (such as sale of stocks, bonds and other investments) that exceed more than $250,000 annually. State estimates for who will pay the tax are under one-quarter of 1 percent of the population. The tax does not apply to legal entities themselves, and the bill was structured to try to avoid taxing gains on the sale of assets that are physically located outside Washington. The amount of tax is based on what taxpayer’s report as their net long-term capital gain for federal income tax purposes, with adjustments.
The state Supreme Court will hear oral arguments on the capital gains income tax on January 26, 2023 and the ruling will come sometime in 2023.