Real estate transactions in Washington State will require the payment of a transfer tax, known locally as a Real Estate Excise Tax, or REET. The tax rate varies depending on the sales price, but it ranges from 1.1% to 3%, with higher valued homes having a higher rate.
For instance, the average $300,000 house would be charged a rate of 1.1%, with $3,300 due in tax. This fee is typically paid by sellers, but as with all things real estate, you can negotiate to split it with the buyer.
If you’re looking for a way to offset the state’s hefty transfer taxes, then Clever Real Estate has a solution for you. Our concierge team will connect you with an experienced local agent that can negotiate the best possible deal on your behalf — and for a low fee of only 1% commission.
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 $500,000
- 1.28% on homes between $500,000 and $1,500,000
- 2.75% on homes between $1,500,000 and $3,000,000
- 3% on homes more than $3,000,000.
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% 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.
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.
The easiest way to find an experienced agent is through Clever. Our partner agents are some of the best in the country and come from major companies like Keller Williams, Century 21, and RE/MAX. Our discounted fees will ensure that you save money throughout the transaction, which can more than cover the money you'll pay in taxes.