Washington Real Estate Excise Tax
All homeowners in Washington should be aware of the changes to the Real Estate Excise Tax (REET) rates that went into effect January 1 of this year.
The new rates present a “glass is half full/half empty” scenario and (to mix metaphors) the benefits and drawbacks “are in the eye of the beholder.” The previous state tax rate was a flat 1.28% of the sales price for all properties. The new rates are graduated, which will reduce the tax for some properties and raise them for others*.
Other than farm or timber land, any property selling for $500,000 and under will have lower taxes this year. Anything over $500,000 – you’ll have to do some calculations, but there will be some savings. Once you hit $1,5000,001 and above, the rates are higher.
For perspective, the Median Sale Price last year for Clark County was $371,000. So, the average home seller will benefit from the new rates this year. Remember. these are NOT property taxes, but taxes you pay when a property sells.
The Department of Revenue (DOR) has published a handy table, with examples, detailing the new rates:
Because this is a graduated tax, properties priced between $500,000.01 and $1,500,000 take advantage of the lower rate taxed on the first $500,000. The example provide by the DOR:
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%.
Note: These rates do not affect the additional local excise rates of .50%
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%.
For those who are curious, there is a convenient REET Tax Calculator spreadsheet available for download. Since the tax is paid at closing, title should calculate pay it out of the settlement statement.
If you are thinking of selling this year and would like an estimate of your new excise taxes, just give us a call.