Taxes aren’t exactly a fun dinner topic, but this year, every Washington resident has a reason to pay attention. We want to help you stay ahead of the game and be ready to have the conversations with your tax professionals. The 2025 state budget brings a series of tax adjustments that will affect families, small business owners, and even estate planning for homeowners.
Here’s the truth: these aren’t just numbers on paper, they influence how you plan your future, your savings,
and even your next move in the housing market.
In this guide, I’ll break down what’s changing, how it could impact you, and what steps Washington residents can take to stay ahead.
What’s Changing in Washington’s 2025 Budget?
Washington’s 2025–2027 operating budget introduces three new revenue bills that aim to increase state funding for infrastructure, education, and social programs. But to raise that revenue, taxes are going up in key areas — especially for service-based businesses, estates, and individuals earning capital gains.
Here’s a simple breakdown:
The sales tax now extends to several professional services that weren’t taxed before (like advertising, tech consulting, and staffing).
The capital gains tax increases from 7% to 9.9% on profits over $1 million.
The estate tax threshold rises to $3 million, but higher-value estates will face new upper tax brackets.
Business and Occupation (B&O) taxes are also increasing slightly for service businesses earning more than $5 million annually.
So, while the budget expands state funding, it also means a ripple effect on costs across the state.
Which Taxes Are Increasing and Who’s Most Affected?
Not everyone will feel these changes the same way. The adjustments target higher-income earners, large estates, and businesses with significant gross receipts. However, ordinary residents may still feel indirect effects through higher costs for goods and services.
Here’s who’s most impacted:
High-income individuals and investors: Anyone realizing large capital gains (over $1 million) will pay the new 9.9% rate.
Large estates: Estates over $9 million will face up to a 35% top marginal rate.
Service businesses: Web developers, consultants, and advertising firms will now charge sales tax on previously exempt services.
For most households, that might mean small price increases for professional services — from home renovation consulting to marketing costs for small businesses.
How Do These Changes Impact Homeowners and Local Families?
For Washington homeowners, the 2025 tax updates may influence estate planning, inheritance, and overall cost of living.
Estate planning: The increased $3 million exemption offers some relief for smaller estates, but wealthier families may need to revisit trusts or gifting strategies.
Property and services: While property tax rates aren’t directly changing, rising costs for contractors and home improvement services could affect project budgets.
Home affordability: If service providers pass on the new sales tax to consumers, costs tied to buying or selling — like staging, marketing, or home prep — could increase slightly.
The good news? Washington’s housing market remains strong. While costs may shift, long-term homeownership continues to be one of the best protections against inflation and rising expenses.
What Should Small Business Owners and Freelancers Know?
If you’re self-employed or run a service-based business in Washington, you’ll want to pay special attention.
Starting October 2025, the state will collect sales tax on seven service categories, including custom web development, advertising, IT services, and temporary staffing.
What this means for you:
You’ll need to register to collect and remit sales tax if you fall under these new service categories.
Businesses earning over $100,000 in gross receipts within Washington may be subject to both sales tax and B&O tax obligations.
If you operate remotely or across state lines, double-check where your “nexus” applies — many online businesses will now need to comply with Washington’s rules.
This may sound intimidating, but local accountants and tax advisors can help business owners navigate these transitions smoothly.
Does the New Capital Gains Tax Affect Real Estate Sales?
Here’s an important clarification: Washington’s capital gains tax does not apply to the sale of real estate.
That’s right, if you sell your primary residence or an investment property, those proceeds are exempt from the capital gains tax.
However, it’s wise to remember:
Investment portfolios, stock options, and business sales could trigger the tax.
Property held within certain trusts or corporations might be treated differently, depending on ownership structure.
If you’re selling real estate in 2025, this change shouldn’t directly affect you — but it’s a reminder that your overall financial picture (investments, inheritance, etc.) is interconnected.
How Could These Updates Influence Washington’s Housing Market?
In the short term, housing demand across South King County and nearby regions like Maple Valley and Bonney Lake is expected to stay steady.
Why? Because while taxes are increasing for businesses and high earners, the housing shortage and population growth in these areas continue to drive demand.
However, we might see:
More strategic timing of sales among higher-income sellers with estate planning in mind.
Slightly slower investment activity in high-value properties.
Ongoing demand from buyers relocating from Seattle seeking more space, better schools, and smaller tax footprints.
As always, housing is about more than economics, it’s about lifestyle, security, and long-term value.
What Steps Can Residents Take to Prepare?
Whether you’re a homeowner, small business owner, or planning your estate, a few proactive steps can help you stay ahead of the 2025 changes:
Review your financial plan. Meet with a tax or estate advisor to understand how these updates affect you personally.
Reassess your home’s value. If you’re planning to sell or refinance, knowing your current equity helps guide decisions.
Plan upgrades wisely. Factor in new service taxes if hiring contractors or professional services.
Stay informed. Policy changes evolve — keeping in touch with a local expert ensures you adapt quickly.
Conclusion
Change is inevitable, but with the right information and planning, it doesn’t have to be overwhelming.
Washington’s 2025 budget may bring new tax responsibilities, but it also offers opportunities to reassess, plan smartly, and build long-term stability through real estate and sound financial decisions.
If you’re wondering how these updates could affect your home, estate, or next move, I’m here to help you make sense of it all, locally and personally.
Ready to plan your next move in South King County?
📞 Contact us at (206)-960-4985 or email clientcare@perkinsnwre.com to start your personalized home strategy today.
Honest. Effective. Reliable.
Frequently Asked Questions
Q: What is the new capital gains tax rate in Washington for 2025?
A: Starting January 1, 2025, long-term capital gains exceeding $1 million are taxed at 9.9%, up from 7%.
Q: Do these changes mean higher property taxes too?
A: No direct property tax increases are part of the 2025 budget, though local levies may still adjust depending on district budgets.
Q: Will selling my home trigger capital gains taxes?
A: In most cases, no — real estate sales remain exempt from Washington’s capital gains tax. Always confirm with your tax advisor.
Q: How can families plan ahead under these new laws?
A: Consider reviewing your estate plan, trust structures, and financial strategy to ensure your assets are protected under new thresholds.
Sources
https://dor.wa.gov
https://www.seattletimes.com/business/washington-state-budget-2025
https://www.nar.realtor/research-and-statistics
https://www.bizjournals.com/seattle
