Do You Pay Sales Tax on a House in Washington?

Buying a home is one of the biggest financial transactions most people will make, and understanding the taxes involved is essential. In Washington state, instead of a traditional sales tax on real estate purchases, buyers and sellers face tax obligations that vary based on location and transaction type.

One of the most significant taxes in a property sale is the Real Estate Excise Tax (REET), which applies when ownership changes hands. Certain exemptions and local variations can affect the amount owed, and specific documentation is required to comply with state regulations.

Real Estate Excise Tax

Washington imposes a Real Estate Excise Tax (REET) on property sales, calculated as a percentage of the selling price. Unlike a flat sales tax, REET follows a tiered structure, meaning higher-value properties are taxed at increasing rates. As of 2024, the state tax rate is:

– 1.1% on sales up to $525,000
– 1.28% on amounts between $525,000 and $1.525 million
– 2.75% on amounts between $1.525 million and $3.025 million
– 3% on amounts above $3.025 million

These rates apply to most real estate transactions, including residential, commercial, and vacant land sales.

In addition to the state tax, counties and cities can impose their own REET, which varies by location. For example, King County adds an extra 0.5%, increasing the total tax burden. These local taxes can significantly impact the final cost of a transaction, so sellers should verify the rates in their area. The tax is typically paid by the seller at closing, but if left unpaid, the buyer may become responsible.

Transfer Exemptions

Some real estate transactions qualify for exemptions from REET, typically when no money changes hands. These exemptions apply to transfers involving spouses, domestic partners, inheritances, and gifts.

Transfers between spouses or domestic partners are exempt, whether due to marriage, divorce, or legal separation. For example, if a home is awarded to one spouse in a divorce settlement, no REET is owed as long as the transfer is documented in a court order. Similarly, adding a spouse to a property title without a financial exchange does not trigger the tax.

Inheritance transfers are also exempt. When a property passes to heirs through a will or intestate succession, the recipient does not owe REET. However, if the heir later sells the property, the tax applies based on the sale price. To claim this exemption, the executor or beneficiary must submit a certified copy of the death certificate and supporting legal documents.

Gifting real estate is tax-free as long as no consideration is exchanged. If a parent gifts a home to their child without requiring payment, no REET applies. However, if the child assumes an outstanding mortgage, the tax may be assessed on the remaining loan balance.

Local Variations

The total REET owed depends on where the property is located. While Washington sets a baseline rate, cities and counties can impose additional taxes, particularly in high-demand areas.

Seattle, for example, adds local surcharges, with revenue often directed toward public services, infrastructure, or housing programs. Even a small percentage increase can add thousands of dollars to a transaction, making it important for buyers and sellers to check their jurisdiction’s rates before closing.

Some areas offer tax incentives for specific types of properties. Low-income housing developments or buildings designated for historic preservation may qualify for partial tax relief, encouraging investment in community-focused projects while reducing the financial burden of real estate transfers.

Documentation Requirements

Proper documentation is required to comply with Washington’s tax regulations and avoid penalties. The key form is the Real Estate Excise Tax Affidavit (REET Affidavit), which details the sale price, property description, and any applicable exemptions. This form must be filed with the county treasurer’s office at the time of transfer. Failure to submit it can result in fines or delays in recording the transaction.

Accuracy in reporting the sale price is essential, as the Washington Department of Revenue periodically reviews transactions to ensure values align with market conditions. If an underreported price is detected, additional taxes, interest, and penalties may be imposed. Supporting documents, such as the final settlement statement or purchase agreement, help verify the declared amount.

For non-traditional transfers, additional paperwork may be required. Corporate or trust-owned properties often need proof of ownership changes, such as corporate resolutions or trust agreements. If a business entity is involved, verifying whether the transfer qualifies as a “controlling interest transfer” under WAC 458-61A-101 is important, as this can trigger separate tax obligations.

By understanding Washington’s real estate excise tax structure, exemptions, and documentation requirements, buyers and sellers can better navigate property transfers and avoid unexpected costs.