For sellers of real property in Washington, this State’s Real Estate Excise Tax (REET) is typically a front-of-mind consideration. Washington uses a graduated scale to calculate the applicable REET for each transaction. The Department of Revenue must adjust the rate threshold every four years pursuant to RCW 82.45.060.
DOR has announced the new REET threshold applicable to transactions beginning on January 1, 2027. Unless an exemption applies, these new brackets apply to all real property and controlling interest transfers (which is the transfer of 50% or more of the interest in an entity that owns real property in Washington). A flat rate of 1.28% will continue to apply to qualified sales of agricultural land and timberland. Please note, however, that the city and local REET rates still apply in addition to the statewide rates. These additional amounts are typically a flat .25% or .5% of the sale price.
Current REET threshold in effect through December 31, 2026:
| For the portion of the selling price that is: | Excise Tax Rate |
| Less than or equal to $525,000 | 1.1% |
| Greater than $525,000 and less than or equal to $1,525,000 | 1.28% |
| Greater than $1,525,000 and less than or equal to $3,025,000 | 2.75% |
| Greater than $3,025,000 | 3.0% |
The REET threshold going into effect January 1, 2027:
| For the portion of the selling price that is: | Excise Tax Rate |
| Less than or equal to $551,000 | 1.1% |
| Greater than $551,000 and less than or equal to $1,551,000 | 1.28% |
| Greater than $1,551,000 and less than or equal to $3,051,000 | 2.75% |
| Greater than $3,051,000 | 3.0% |
Washington REET is calculated using a stair-step method. Under the current rates, the first $525,000 is taxed at 1.1%, the next $1,000,000 is taxed at 1.28%, and so on. Therefore, these adjusted sale price brackets will push more of the sale price into a lower bracket and will ultimately result in some savings on REET. For example, a real estate transaction with a sale price of $3,050,000 will see a small portion of the sale price fall into the highest 3.0% bracket if closed before December 31, 2026. However, if that same transaction closes on or after January 1, 2027, the sale price would fall into the lowest three brackets and not exceed the 2.75% threshold, ultimately resulting in less statewide REET owed.
Sellers should keep this in mind, particularly for transactions closing near the end of the year. Strategically negotiating a sale price or closing date with these new sale price brackets in mind may allow some parties to save on REET.
If you have questions related to real estate excise tax and/or need assistance with a real estate transaction, the Lasher real estate practice group is happy to help.
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