Washington State is rolling out major changes to its estate and capital gains tax laws starting in 2025. These updates could significantly impact how your assets are taxed—whether you’re selling appreciated investments, planning your estate, or preparing for the future.
Understanding what’s changing—and how to adjust your strategy—can help you avoid costly surprises and keep more of what you’ve worked hard to build. Here’s what you need to know.
How Washington’s Estate Tax Is Changing in 2025
If you’re planning to leave assets to loved ones or charitable causes, Washington’s estate tax is a key area to watch.
As of July 1, 2025, the estate tax exemption increases to $3 million, with future inflation adjustments. That’s good news for many families. However, for estates that exceed this threshold, the tax rates are rising significantly.
Here’s a chart showing how the estate tax rates are changing. These rates apply only to the value above the $3 million exemption.
| Taxable Estate Value | 2024 Rate | New 2025 Rate |
| $0–$1M | 10% | 10% |
| $1M–$2M | 14% | 15% |
| $2M–$3M | 15% | 17% |
| $3M–$4M | 16% | 19% |
| $4M–$6M | 18% | 23% |
| $6M–$7M | 19% | 26% |
| $7M–$9M | 19.5% | 30% |
| $9M+ | 20% | 35% |
Washington State Estate Tax Comparison: 2024 vs. 2025
Here’s how the estate tax impact compares under current law versus the 2025 changes at different estate sizes:
- At $5 million
- 2024: Approx. $360,000 in estate tax
- 2025: $250,000 — lower due to the higher $3 million exemption
- At $20 million
- 2024: Approx. $3.25 million in estate tax
- 2025: Approx. $4.73 million in estate tax
- At $50 million
- 2024: Approx. $9.25 million in estate tax
- 2025: Approx. $15.23 million in estate tax
Keep in mind: these numbers only reflect Washington’s estate tax. If your estate is large enough, federal estate tax could also come into play.
For a deeper dive, read: Should I Leave Washington State to Avoid the Estate Tax?
What Business Owners Need to Know
For business owners, the deduction for family-owned businesses increases from $2.5 million to $3 million. To qualify, the business must make up over 50% of your taxable estate and have been actively operated by you or a family member for at least five of the past eight years.
However, if the business is sold or ceases to qualify within three years of your passing, the deduction may be recaptured through an additional estate tax.
New 2.9% Surtax on High Capital Gains
Washington already imposes a 7% tax on long-term capital gains over a set annual threshold. But retroactive to January 1, 2025, the state adds a 2.9% surtax on any Washington-based gains that exceed $1 million.
Here’s how it works:
- The first $270,000 in gains is tax-free—this exemption increases each year with inflation.
- The first $1 million in gains above the exemption will continue to be taxed at 7%.
- Any gains above $1 million will now be taxed at 9.9%.
For example, if you realize $1.5 million in long-term gains:
- The first $270,000 is tax-free
- $1 million is taxed at 7%
- The remaining $230,000 is taxed at 9.9%
For a deeper dive, read: Washington’s State 7% Capital Gains Tax, Explained
Tax Planning Strategies to Consider Now
With these shifts ahead, here are key steps to consider:
- Review your estate documents – Ensure your plan takes advantage of the new $3 million exemption and plans for the higher tax tiers.
- Consider gifting or trust strategies – You may be able to transfer assets now to reduce future estate size.
- Plan the timing of capital gains – If you’re near the $1 million threshold, timing and structure will matter more than ever.
- Evaluate your business succession plan – Make sure it not only works for your goals, but also for these new tax realities.
Let’s Talk Through Your Plan
We know these updates can feel overwhelming—but they don’t have to be. We can help make the complex simple. Whether you’re reviewing your estate plan, evaluating capital gains exposure, or just wondering what all of this means for your plan, we’re here to help.
For More on Estate Planning and Legacy Strategies, Explore These Articles:
- How Do I Reduce Estate Taxes?
Actionable strategies to minimize estate tax while staying true to your legacy goals. - Can You Gift Too Much?
Explore when generous giving helps—and when it could complicate your plan. - Leaving a Legacy: Plan by Default or Plan by Design?
Understand the difference between passive and intentional legacy planning—and why it matters.
Will taxes take too much from your estate?
Josh Whelan
CFP®, CLU®, ChFC®
Partner, Financial Advisor
About the Author
Josh sees his profession as a calling, not just a career. His motive for pursing financial planning was very personal. While working on a degree in marriage and family counseling, Josh’s father was diagnosed with multiple sclerosis. Josh decided then and there to change career paths to help his family prepare for an uncertain financial future. Financial planning became his path to serving others.
The “Alterra” name was coined by joining the Latin roots “alter”, the origin of the word “altruism” with “terra” meaning earth or land. This name reflects the company philosophy of “clients before profits” and providing firmly grounded advice.
