In what seems live an ever increasing need to generate more money, the Washington state legislature made some changes to the Real Estate Excise Tax (REET) that will go into effect in 2020. If you have sold a home in Washington, you may recall that the state imposed a flat tax of 1.28% on the sale payable by the seller. In addition, many local cities imposed an additional flat rate of .50% which brought the total tax to 1.78%. This taxed applied equally across the board to all home sellers.
Beginning January 1, 2020, this uniform flat REET will change to a graduated rate as follows:
1% on the first $500,000 of the selling price;
1.28% of the amount in excess of $500,000 but less than $1.5 million;
2.75% of the amount between $1.5 million and $3 million; and
3% on the amount in excess of $3 million.
For example, if you sold your home for $1,ooo,ooo, the new state REET would be $11,400 (1% of the first $500,000 of the sale price and 1.28% of the second $500,000 of the sale price). The new law does not affect the local portion (which would remain in most cases .05%) so the total REET on this transaction would be $11,900. So, a seller of this $1M home would actually save $900 in 2020 compared to the 12,800 they would pay today.
So who will be most impacted by this new tax. That would be sellers of homes above approximately $1.7M. That’s when the graduated rates start kicking in to raise the total REET compared to the current flat rate.
Sellers should keep this in mind as they approach the 2nd half of 2019 and of course, consult with their tax advisor or knowledgeable real estate professional for more clarity on this important change.
If you have questions or needs related to buying or selling real estate in the great Eastside, please contact me at email@example.com. I’d love to chat with you!