Washington Estate Tax.
Washington does not have an inheritance tax. However, Washington does have an estate tax. In general terms, an inheritance tax is a tax on the beneficiaries of an estate whereas an estate tax is a tax on the decedent's estate. If you are a person living in Washington who inherits property or money, you do not owe Washington taxes on your inheritance. The estate tax is a tax on the right to transfer property at the time of death. A person residing in Washington or a non-resident who owns property in Washington may owe an estate tax depending on the value of their estate.
The executor for a decedent's estate is required to file an estate tax return if the gross estate meets the filing threshold for the date of death. The current threshold amount is $2.193 million. If the total gross estate is below the filing threshold, no estate tax return needs to be filed. If the total gross estate is above the filing threshold, an estate tax return must be filed even if no tax would be due. If a Washington return is required to be filed and a federal estate tax return is filed, a copy of the federal return must be included with the Washington estate tax filing.
All assets owned by the decedent on the date of death should be included in the estate. All assets, even if located in another state, should be reported on the estate tax return as part of the gross estate.
Deductions and Adjustments to the Taxable Estate.
Deductions are made from the total gross estate, including funeral expenses, debts of the decedent, and charitable gifts and bequests.
For the estate of a married decedent, all of the community property and all of the decedent's separate property are reported on the estate tax return. The community property assets are then reduced by 50 percent to reflect the decedent's share of the property. Even if the entire estate will pass to the surviving spouse and no taxes may be due, an estate tax return must be filed if the decedent's half of the community property plus the decedent's separate property meets the filing threshold.
The value of a qualified family-owned business interest (QFOBI) may be deducted from the taxable value of an estate so long as certain requirements are met. The QFOBI deduction is limited to the lesser value of the QFOBI or $2.5 million. An heir to the QFOBI must continue the trade or business for three years from the date of death. Failure to meet this requirement for the QFOBI will result in additional tax due.
The value of farms and timberlands may also be deducted from the taxable value of an estate so long as certain requirements are met. This deduction applies to land, farm structures, and farming equipment. It is an unlimited deduction and an heir to the farm does not have to continue farming in order for the estate to take the deduction.
Exclusion Amount.
The adjusted taxable estate is the value of the estate after all deductions and adjustments are made. The applicable exclusion amount is an amount deducted from the adjusted taxable estate prior to calculating estate tax due. The current exclusion amount is $2.193 million. The exclusion amount was adjusted annually based on the Consumer Price Index (CPI) for the Seattle-Tacoma-Bremerton metropolitan area as calculated by the United States Bureau of Labor Statistics (USBLS). However, the CPI for this statistical area is no longer calculated by the USBLS, and as a result, the exclusion amount for the estate tax has not changed since 2018.
Washington Taxable Estate Tax Rates.
For deaths occurring on or after January 1, 2014, the Washington estate tax rates are as follows on the decedent's Washington taxable estate, which is the remaining estate value after all allowable adjustments and deductions, including the exclusion amount:
If the Washington taxable estate is at least… | But less than… | The amount of tax equals: initial tax amount | Plus tax rate percent | Of Washington taxable estate value greater than: |
$0 | $1,000,000 | $0 | 10% | $0 |
$1,000,000 | $2,000,000 | $100,000 | 14% | $1,000,000 |
$2,000,000 | $3,000,000 | $240,000 | 15% | $2,000,000 |
$3,000,000 | $4,000,000 | $390,000 | 16% | $3,000,000 |
$4,000,000 | $6,000,000 | $550,000 | 18% | $4,000,000 |
$6,000,000 | $7,000,000 | $910,000 | 19% | $6,000,000 |
$7,000,000 | $9,000,000 | $1,100,000 | 19.5% | $7,000,000 |
$9,000,000 |
| $1,490,000 | 20% | $9,000,000 |
Estate Tax Revenues.
The proceeds of the estate tax are deposited into the Education Legacy Trust Account (ELTA). The ELTA may be used only for the support of the common schools, expanding access to higher education through funding for new enrollments and financial aid, and other educational improvement efforts.
For estates of decedents dying on or after January 1, 2025, changes are made to the estate tax. The exclusion amount is increased to $3 million and the language providing for annual adjustment is updated to reflect the change in the CPI for the Seattle metropolitan area.
The rates for Washington taxable estates are increased for estates of decedents dying on or after January 1, 2025. The following table summarizes the new rates for a Washington taxable estate.
If the Washington taxable estate is at least… | But less than… | The amount of tax equals: initial tax amount | Plus tax rate percent | Of Washington taxable estate value greater than: |
$0 | $1,000,000 | $0 | 16% | $0 |
$1,000,000 | $2,000,000 | $160,000 | 17% | $1,000,000 |
$2,000,000 | $3,000,000 | $330,000 | 20% | $2,000,000 |
$3,000,000 | $4,000,000 | $530,000 | 26% | $3,000,000 |
$4,000,000 | $6,000,000 | $790,000 | 31% | $4,000,000 |
$6,000,000 | $7,000,000 | $1,410,000 | 35% | $6,000,000 |
$7,000,000 | $9,000,000 | $1,760,000 | 36% | $7,000,000 |
$9,000,000 |
| $2,480,000 | 38% | $9,000,000 |
The act applies retroactively and prospectively.