Does Washington's New Millionaires Tax Apply to Home Sales?

Washington's new millionaires tax (SB 6346), signed into law on March 30, 2026, does not apply to home sales (yet!). Real estate gains are explicitly exempt from both Washington's capital gains excise tax and the new 9.9% income tax — and that exemption has been in place since 2022. Bellingham sellers and buyers are not subject to this tax on residential or investment real estate transactions. What sellers do owe at closing is Washington's Real Estate Excise Tax (REET), a separate, long-standing transfer tax that applies regardless of the new legislation.

By Sean Hackney | June 8, 2026

The phone calls and texts started in April.

"Sean, I was planning to list this spring, but then I saw that headline about Washington's new income tax. Should I wait?"

"We're thinking about selling our Edgemoor home and buying down in Arizona to retire. Are we going to get hit by this millionaires tax?"

I understand the concern. When a headline reads "Washington adopts a 9.9% income tax," it lands differently if you're sitting on a home that's appreciated by $400,000 or $600,000 over the past decade. The alarm is instinctive.

Here's the direct answer: your home sale is exempt from this tax. Currently, real estate was carved out of Washington's capital gains excise tax when that law was first enacted in 2022 — and that exemption survived the 2026 millionaires tax legislation completely intact.

At least for the time being.  It’s easy to cheer on this tax to the rich and I understand that, BUT….the concerning part about all of this is the door it has left open.  Whether it is home sale proceeds, out of state workers who come into Washington to work with area businesses (yes you read that right!), or even the Denver Bronco player who comes to Seattle for the game….yes, the door has been opened.  

Let me walk you through exactly what the law says, what sellers in Bellingham and Whatcom County actually pay at closing, and why the confusion spread so fast.

What Washington's Millionaires Tax Actually Says

Governor Ferguson signed SB 6346 on March 30, 2026. The law imposes a 9.9% income tax on household income exceeding $1 million per year. It doesn't take effect until January 1, 2028, with first returns due in 2029 — and it's already expected to face legal challenges before it ever kicks in.

More importantly for home sellers: the law explicitly excludes real estate from the tax base. Currently.

The statute specifies that gains from the sale of real property are excluded from Washington's capital gains calculation — and the millionaires tax uses the same framework with the same carve-outs. Washington's Department of Revenue has confirmed this interpretation, as have legal analyses from major Pacific Northwest law firms.

What this means for you: if you sell your Fairhaven Victorian, your Edgemoor waterfront home, or a Silver Beach lakefront property, your proceeds are not subject to this tax. Not in 2026. Not in 2028 when the law takes effect. Not under current law, but don’t be fooled…the ground work has been set with a wide open door.  AND most importantly…we, as tax pay citizens didn’t get to vote on this!

One honest qualifier: if your financial picture is more complicated — significant stock gains, business income crossing the $1M threshold, or a property held inside a business entity — that's a more nuanced conversation. Talk to a CPA who knows Washington tax law before you make any decisions. The real estate exemption is clear; how it interacts with complex income situations is worth a professional review.  

What You Actually Pay When You Sell in Bellingham

So if the millionaires tax doesn't apply, what does? Washington sellers have two tax-related obligations worth understanding — and one of them surprises almost everyone selling here for the first time.

The Real Estate Excise Tax (REET)

REET is Washington State's transfer tax on real estate sales. It's paid by the seller at closing, calculated on the full sale price — not your profit.

The current rate structure:

• 1.10% on the first $525,000

• 1.28% on $525,000.01 to $1,525,000

• 2.75% on $1,525,000.01 to $3,025,000

• 3.00% above $3,025,000

Most Bellingham homes fall in that second bracket. On a $750,000 sale, you're looking at approximately $12,900 in state REET, plus Whatcom County's local surcharge of up to 0.50% — bringing the total REET obligation to roughly $15,500–$16,000.

That's a real cost, and it exists whether the millionaires tax passed or not. It has nothing to do with the 2026 legislation. But it's the tax that actually affects your Bellingham sale, and a lot of sellers don't fully account for it until they see the closing disclosure.

Federal Capital Gains — and Your Exclusion

Federal capital gains on a home sale are a completely separate matter from Washington State taxes.

Federal law allows homeowners to exclude up to $250,000 in gains ($500,000 for married couples) on the sale of a primary residence, provided you've owned and lived in the home for at least two of the last five years. For most Bellingham homeowners selling their primary residence, this exclusion covers the bulk — or all — of any taxable gain.

If you've lived in your home for 10 to 20 years and it's been your primary residence, you likely won't owe federal capital gains either. But if you're selling a second home, an investment property, or a home you've rented out for several years, that's a different calculation — worth running by a CPA before you list.

Your Net Number: What Sellers Actually Walk Away With

When you add it all up — REET, agent commissions, escrow fees, title insurance, and pre-closing prep — selling a Bellingham home typically costs between 8–10% of the sale price.

On a $750,000 home, that's $60,000–$75,000 leaving your proceeds at closing. The number you care about isn't the sale price on the sign. It's what ends up in your account after all of it.

This is the number I walk every seller through before we do anything else. Understanding why Bellingham prices are where they are — and what you'll realistically net at those prices — is half the decision. The other half is timing. Those two conversations are easier to have together, before a sign goes in the yard.

For Buyers: What Does This Mean for You?

If you're buying in Bellingham, Washington's new tax legislation doesn't directly affect your purchase transaction. REET is paid by the seller. And since real estate gains are exempt from the millionaires tax, sellers aren't passing along any new tax burden through higher prices.

For buyers relocating from British Columbia or high-income-tax states, Washington's tax advantages remain largely intact. Wages are untaxed in Washington (until the millionaires tax kicks in for earners above $1M in 2028), and real estate transactions are entirely exempt. The "no income tax" talking point that's drawn buyers to Washington for decades still largely holds — at least for the real estate side of things.

What does affect buyers is the affordability picture, which is its own conversation. The latest Bellingham market data shows inventory up year-over-year and a slightly more balanced market than 2021–2023 — but prices remain elevated, and the qualification bar is high. That's worth working through with someone who knows the Whatcom County market before you set your search parameters.

Why the Confusion Spread So Fast

If the real estate exemption is this clear, why is everyone worried?

The headlines got ahead of the fine print. "Washington adopts 9.9% income tax" is factually accurate but lands very differently than "Washington adopts 9.9% income tax with real estate, retirement accounts, and family businesses explicitly excluded."

Washington has historically had no income tax at all — it's one of the state's signature financial advantages. It’s actually against the State Constitution, which is why the wording of this is some important.  Have I mentioned the door being left WIDE OPEN!! 

The legislation itself has layered effective dates and exemption language that initially confused even some industry professionals. SB 6346 was partly designed to clean up confusion from earlier legislation (ESSB 5814), and the cleanup introduced its own complexity.

And Washington's existing capital gains excise tax — the 7% tax on long-term capital gains above $270,000 enacted in 2022 — already had a real estate exemption. But not everyone knew that tax existed, and fewer still knew about its carve-outs. When the millionaires tax layered on top, the confusion compounded.

The result: sellers who have been pausing legitimate listing decisions over a tax that doesn't apply to them.

Frequently Asked Questions

Does Washington's new millionaires tax apply to the sale of my home?

No…not at this time.  Real estate gains are explicitly exempt from Washington's new 9.9% income tax (SB 6346), signed into law in March 2026, as well as from Washington's existing capital gains excise tax. This exemption has been in place since 2022 and survived intact through the 2026 legislation. Residential and investment property sales in Washington State are not subject to either tax.

What taxes does a home seller actually pay in Washington State?

Washington sellers pay the Real Estate Excise Tax (REET) at closing. REET is calculated on the full sale price — not the profit — with rates ranging from 1.10% to 3.00% depending on the price bracket. On a $750,000 Bellingham home, REET totals approximately $15,500–$16,000 including Whatcom County's local surcharge. Sellers may also owe federal capital gains tax if their gain exceeds the $250,000/$500,000 primary residence exclusion, though most long-term homeowners selling a primary residence don't reach that threshold.

When does Washington's millionaires tax actually take effect?

The law was signed on March 30, 2026, but the tax itself doesn't take effect until January 1, 2028, with first returns due in 2029. The law is also expected to face constitutional challenges before it ever takes effect. For home sellers, none of this changes anything — real estate is exempt regardless of when the law takes effect.

Does the Washington millionaires tax affect buyers looking to purchase in Bellingham?

No, not directly. The Real Estate Excise Tax (REET) is paid by the seller, not the buyer. Since real estate gains are exempt from the millionaires tax, sellers aren't passing along any new tax-related costs to buyers. The factors that affect buyers in Bellingham are home prices, mortgage rates, and qualification thresholds — not the 2026 tax legislation.

Will Washington State's new income tax affect people relocating from British Columbia or California?

Not on real estate. Washington remains a state with no income tax on wages (until the millionaires tax kicks in for earners above $1M in 2028), and real estate transactions are entirely exempt. For buyers relocating from high-income-tax provinces or states, Washington's tax advantages remain largely intact — particularly for home buying and selling.

The bottom line is straightforward: Washington's new millionaires tax doesn't affect your home sale. Real estate is exempt, the legislation is clear, and delaying a listing decision over this concern isn't necessary.

What is worth thinking through is your complete net proceeds picture — REET, commissions, escrow, pre-closing costs — and whether the current Bellingham market timing aligns with your goals. Those are the conversations I have with every seller before we put a strategy together.

If you're sorting through your options in Whatcom County, I'm happy to walk through the numbers with you. Reach out anytime at seanhackneyhomes.com.

About Sean Hackney Sean Hackney is a Bellingham-based REALTOR® with 23 years of experience specializing in luxury, waterfront, and historic properties throughout Whatcom County. Affiliated with NextHome NW Living, Sean brings deep local knowledge and a relationship-first approach to every transaction. Watch Sean's local market videos at youtube.com/@LivinginBellingham, read client reviews at seanhackneyreviews.com, or connect at seanhackneyhomes.com.