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NEW Real Estate Excise Tax in 2020

Dec 18, 2019 | Buying a Business, Selling a Business

Effective Jan. 1, 2020! New Real Estate Excise Tax!

Real estate excise tax (REET) is a tax on the sale of real estate. The real estate excise tax is typically paid by the seller of the property, although the buyer is liable for the tax if it is not paid. The tax applies to the seller. The tax also applies to transfers of controlling interests (50% or more) in entities that own property in the state.

Changes to REET effective Jan. 1, 2020

Effective Jan. 1, 2020, ESSB 5998 made changes to the real estate excise tax program. Some of these changes include:

  • a graduated state REET rate structure for sales of real property
  • exception: agricultural land/timberland is excluded from the new rate structure and will continue to have a state REET rate of 1.28%
  • updates for controlling interest transfers (50% or more change of ownership in an entity that owns real property)
  • expands the transfer period from 12 months to 36 months
  • changes the reporting requirements during the annual corporate renewal cycle to disclose any transfers of 16% of more

Tax calculator for state REET tax

Graduated REET structure

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%

Calculating the graduated state real estate excise tax:

Example A:

If the total sale price is $600,000, then the first $500,000 is taxed at 1.10%. The remaining $100,000 is taxed at 1.28%.

$500,000 x 1.10% = $5,500
$100,000 x 1.28% = $1,280
Total taxes: $6,780

Example B:

If the total sale price is $4.4 million, then the first $500,000 is taxed at 1.10%. The next $1 million is taxed at 1.28%. The next $1.5 million is taxed at 2.75% and the final $1.4 million is taxed at 3%.

$500,000 x 1.10% = $5,500
$1,000,000 x 1.28% = $12,800
$1,500,000 x 2.75% =$41,250
$1,400,000 x 3% =$42,000
Total taxes: $101,550

How to pay the tax

County treasurers collect the state and local taxes, except for the tax that applies to acquisition of controlling interests which is reported directly to the Department of Revenue.

How funds are used

1.3% of the state tax collected by counties is retained to cover administration costs. Of the net proceeds to the state, 2% goes into the public works assistance account, 4.1% to the education legacy account with remaining amounts going the general fund.

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