Who pays transfer taxes? | When are transfer taxes paid? | Methodology
In Washington, all real estate sales are subject to a transfer tax known as a real estate excise tax, or REET. Washington's current transfer tax rate is $1.10 to $3.00 per $100. So, for a house worth $575,894 — the median home price in the state — the transfer tax due will be $6,335. Higher-valued homes have a higher rate.
The specifics on who pays the transfer tax in Washington can be negotiated, but usually the seller is responsible.
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Transfer taxes are a necessary evil when selling a home. But the good news is there are ways to save on home selling costs that can lessen the blow.
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Here's what you need to about Washington real estate transfer taxes, who pays them, and how you can limit your tax exposure after closing.
Who pays transfer taxes in Washington: The buyer or the seller?
Sellers are required to pay the transfer tax in Washington State. But there's an important caveat for buyers. They are liable for the tax if it's not paid.
Sometimes sellers and buyers can come to a deal on who will pay this tax and how much. It's important to note that when you buy a property everything is up for negotiation and that includes who will pay the transfer tax (or what portion of it). A buyer and seller can even decide to split the tax cost equally between them.
How much are transfer taxes in Washington?
The REET in Washington State is:
- 1.1% on homes less than $525,000
- 1.28% on homes between $525,000.01 and $1,525,000
- 2.75% on homes between $1,525,000.01 and $3,025,000
- 3% on homes $3,025,000.01 or more
But home buyers and sellers should note that many local jurisdictions impose their own additional transfer tax in addition to the REET.
You can’t avoid paying the REET, but you can cut costs from your overhead to cover your losses. Clever Partner Agents can negotiate with your buyer to have them split the transfer fees — or even shoulder the entire cost.
You’ll only pay a 1.5% listing fee for the service, which is a huge discount compared to the national average of 3%! What you save will cover more than just the taxes due — you’ll take home a higher overall profit too.
Can you deduct transfer taxes?
The costs of selling and buying a home can add up. Some of the costs are tax-deductible, others are not. Unfortunately, transfer taxes are not tax deductible for either the buyer or the seller. Although transfer taxes cannot be deducted as a sale of personal property, they can be deducted as a work expense, but only if the property is used as a rental home or a real-estate investment.
To make sure that you fulfill all the legal and tax requirements, it's best to talk to a professional realtor about other restrictions and tax benefit you may be entitled to.
Transfer taxes can save you money, even if they are not tax deductible.
They are considered part of the cost basis of the property that is used to calculate the final capital gain if the property is sold. Raising the cost basis of the home decreases the total gain on sale and your tax exposure. That means you will pay less in total taxes on the gain.
For example, if you bought a house for $200,000 and sold it later for $500,000, your capital gain would be $300,000. That means you must pay taxes on a capital gain of $50,000, the amount by which you have surpassed the limit of $250,000 that is free from capital gains taxes. (The limit is $500,000 for joint returns.)
If you paid $10,000 in transfer taxes, you can add this to the home's original property value. In other words, your capital gain will be $40,000, not $50,000 and your tax assessment would reflect this.
Speak to a Clever Partner Agent about other tax savings for buyers and sellers. They will also be able to tell you about other government programs and grants that can cut down on your closing costs.
When do you pay transfer taxes in Washington?
Transfer taxes are paid at the closing of a deal, and in most cases are paid by the seller. So, when you're filing your taxes, sellers should be sure to deduct the transfer tax from their capital gain.
This is especially important because capital gains tax is paid to the federal government and the transfer tax is paid to the state government. So, chances are, you'll be paying both these taxes separately, and at different times.
Washington transfer taxes summary
Washington’s REET can be complicated to understand. With scaling rates and additional fees that local jurisdictions may impose, you’ll need a local expert to ensure that you’re fully compliant with all your tax dues. Besides providing valuable advice and guidance, a real estate agent can also ensure you get the best deal out of your transaction.
We’ll partner you with a local real estate agent who knows how to deal with the state’s tax and helps negotiate a deal in your favor. What’s more, our agents charge only a 1.5% listing fee compared to the state average of 2.75%! The money you'll save can more than offset the cost of the transfer taxes.
» SAVE: Learn more about how a Clever agent can help you navigate Washington state transfer taxes
Methodology
- Transfer tax amounts are based on government website information as of February 2024.
- We gathered our listing commission rate data from a December 2023 survey of 630 of our partner agents.
- Home values, list prices, and sale prices are based on Zillow data as of February 2024.
