Market Letter

Washington's 2025–2026 Tax Changes and the Eastside Real Estate Market

May 4, 2026

Washington enacted significant changes to its capital gains, estate, and income tax structures between 2025 and 2026. These changes are showing up in the Eastside real estate market in tangible ways, and clients on both sides of transactions are asking practical questions about what they mean.

I'm a real estate agent, not a tax attorney or CPA, so what follows is a market explainer, not personal tax advice. For your specific situation, please work with a qualified estate planner or CPA. If you live, own, or are considering buying on the Eastside, this is meant to give you a clear picture of the relevant changes and how they're affecting transactions today.

The headline that captures the moment

In April 2025, the sale at 4053 Hunts Point Road closed at $63 million, the highest residential sale in Washington state history (GeekWire, April 10, 2025; The Real Deal, April 11, 2025). The same property had been acquired for $37.5 million in 2019. The state Real Estate Excise Tax on the sale alone was approximately $1.85 million.

That sale was a footnote in a larger story. By the time the Hunts Point property closed in 2025, the seller had already moved his official residence from Washington to Miami in late 2023. Through the end of 2024, approximately $13.6 billion of stock was liquidated from Florida, avoiding roughly $954 million in Washington state capital gains tax alone (Fortune, December 18, 2024). The estate tax savings, the family office calculated to Fortune, "can be $10 billion."

He's not the only one. A high-profile Seattle CEO announced a Seattle-to-Miami move on March 11, 2026, the day after the Washington legislature passed the new millionaires' income tax in the House (CBS News, March 11, 2026; KING 5, March 11, 2026). Starbucks corporate announced in April 2026 a $100 million investment and 2,000 new jobs in Nashville rather than Seattle (Starbucks investor release, April 21, 2026; Restaurant Dive, April 21, 2026).

These aren't isolated stories. IRS migration data, Washington Department of Licensing records, and the inventory I'm seeing in my own listings all point the same direction: a meaningful share of Washington's highest-income residents are reconsidering domicile. Because the Eastside is where many of those residents live, it's where these decisions show up most clearly in the housing market.

The four laws that changed everything

1. The capital gains tax, now 9.9%

Washington enacted a 7% excise on long-term capital gains over an indexed threshold in 2021 (SB 5096). The Washington Supreme Court upheld it in Quinn v. State (March 2023). Voters declined to repeal it through Initiative 2109 in November 2024 (WA Department of Revenue).

In May 2025, Governor Ferguson signed ESSB 5813, adding a 2.9% surcharge on long-term gains above $1 million, retroactive to January 1, 2025, taking the top rate to 9.9% (Ballard Spahr alert, May 22, 2025; Stokes Lawrence). The 2025 standard deduction is $278,000, adjusted annually for inflation (WA DOR).

Combined with the 20% federal long-term capital gains rate, a Washington resident now pays roughly 30% on long-term gains over $1 million. That eliminates Washington's prior advantage over California and Oregon for M&A exits and equity compensation, the two things that have created most new Eastside wealth over the last 15 years.

2. The 35% estate tax (the highest in America for one year)

Pre-July 2025: $2.193M exclusion (frozen since 2018), graduated rates 10%–20% topping out at $9M+, no spousal portability (Ballard Spahr).

Effective July 1, 2025: ESSB 5813 raised the exclusion to $3M per individual (indexed to Seattle CPI-U; 2026 exclusion is $3,076,000) and raised the top marginal rate from 20% to 35% on taxable estates over $9M, the highest top estate tax rate in the United States (Stokes Lawrence; Clark Nuber, May 27, 2025).

A reversal: SB 6347, signed in 2026, drops the top rate back to 20% for decedents dying on or after July 1, 2026. The $3M exclusion stays but loses inflation indexing going forward (Carney Badley Spellman, April 2026).

This is genuinely critical for Eastside owners to understand. Many West Bellevue, Medina, Hunts Point, and Mercer Island homes alone exceed $3 million. Washington has no portability, so a married couple cannot stack to $6M with simple wills (credit-shelter trusts are essential). And Washington estate tax applies to Washington-situs real estate even after a resident moves out of state. A Suncadia cabin, a Wenatchee orchard, or a Seattle rental remains taxable to Washington even if the owner died as a Florida resident.

The federal exemption sits at $13.99M for 2025, made permanent at $15M / $30M couple by the July 2025 federal "One Big Beautiful Bill Act." Most Eastside households wealthy enough to face Washington estate tax owe nothing federally, which is exactly why the planning conversations have shifted as much as they have.

3. Real Estate Excise Tax: among the highest in the nation

The graduated REET enacted by ESSB 5998 (effective January 1, 2020) hasn't changed (WA Department of Revenue):

Selling price	State REET
≤ $525,000	1.1%
$525,001 – $1,525,000	1.28%
$1,525,001 – $3,025,000	2.75%
Over $3,025,000	3.0%

Local REET adds another 0.5% in most King County cities, for a combined max of approximately 3.5% on the portion above $3.025M.

What that means in real dollars on Eastside sales:

$2M Bellevue home: ~$33,200 total REET (paid by seller)
$5M Medina waterfront: ~$133,250
$10M Hunts Point estate: ~$308,250
The $63M Hunts Point sale (April 2025): ~$1.85M in state REET alone

For context: most peer Mountain West states (Idaho, Wyoming, Nevada, Texas, Arizona, Montana) charge 0% transfer tax. Florida charges 0.7%. California charges 0.11% state plus local. Washington's 3% top tier is among the highest in the country for high-value sales.

4. The new 2026 millionaires' tax

Governor Ferguson signed SB 6346 on March 30, 2026: a flat 9.9% tax on Washington adjusted gross income exceeding $1 million per household, effective January 1, 2028. First returns due 2029. Projected revenue: $3.5B+ annually (Carney Badley Spellman, April 2026).

This is what triggered the high-profile CEO move announcement the day after the House vote. It's also what's driving a large share of the planning conversations I'm hearing about right now, because high-income earners have effectively two tax years to decide whether they want to be Washington residents in 2028.

There's pending constitutional risk: the tax relies on the same "excise on receipt of income" theory that survived in Quinn v. State. The bill contains a fall-together clause invalidating accompanying sales-tax exemptions if the income tax is overturned. Litigation is expected. But planning around the law as if it will stand is the conservative move, and it's what most family offices and tax advisors I'm hearing from are doing.

What the data actually shows about who's leaving

This is where the picture gets interesting. The IRS publishes Statistics of Income migration data showing where taxpayers actually moved. The latest release (2022–2023 data, published 2025) shows Washington went from being the 10th-best state for AGI from migration over the past decade to 40th in a single year, coincident with the capital gains tax going into effect.

Specifically:

Washington lost approximately $500 million in net AGI to outmigration between 2022 and 2023 (per Seattle Red, citing IRS and WA Dept. of Licensing data)
Idaho gained over $1 billion in AGI from new residents in the same period, much of it from Washington
Domestic in-migration to Washington is down 18% versus pre-pandemic
ApartmentList data shows 25% of relocators looking to Boise come from the Seattle metro, the largest single feeder market
Coeur d'Alene's #1 feeder market is the Spokane–Seattle metro corridor

A 2024 SmartAsset study of high-earning millennials ($200K+ income) ranked Washington 8th worst for net household outflows. A mid-2025 follow-up ranked Washington second only to Illinois for net outflows of affluent Gen Z professionals.

Compare to California, the state we've all been told everyone is fleeing: California lost net 100,397 filers (2022–23) and an estimated 24,670 high-AGI households. Washington's per-capita outmigration rate among high earners is now approaching California's, a striking reversal for a state that was a net winner for most of the past decade.

The shift is real, and what's notable is how it's happening: most of these moves don't require selling a Washington home or leaving the region permanently. Many high-income residents are simply changing legal domicile while keeping a property here. That distinction matters for the housing market, because it means inventory effects show up gradually rather than all at once.

What I'm seeing in Eastside inventory

The Spring 2026 Eastside Luxury Market report (Judah Realty / Realogics SIR, NWMLS data) gives the clearest picture:

Eastside median price Q1 2026: $1.475M (+1.4% from Q4 2025)
Active listings up 29% year-over-year, the biggest inventory growth since Q3 2023
Average days on market: 42 days in Clyde Hill, Meydenbauer Bay, and Enatai (up from 35 in Q4 2025)

The most expensive listing in the Pacific Northwest in 2026 is "Triptych," a 3.37-acre Olson Kundig-designed Medina waterfront listed at $79 million, eclipsing the $63M April 2025 record sale.

What that adds up to is this: a meaningful share of Eastside ultra-luxury inventory is now seller-driven by tax planning rather than lifestyle preference. ZIPs 98039 (Medina), 98004 (West Bellevue / Hunts Point / Yarrow Point / Clyde Hill), 98040 (Mercer Island), and 98033/98034 (Kirkland) collectively house 12 of Forbes' 2025 Washington billionaires. And the legal and accounting counsel I'm hearing from (Perkins Coie, Holland & Knight, Moss Adams, Clark Nuber, Brickley Wealth) has shifted toward lifetime gifting, credit-shelter trusts, dynasty trusts in Delaware / South Dakota / Nevada, and outright domicile change to Florida, Texas, Nevada, Wyoming, or Tennessee.

What this means if you're a buyer

If you're shopping the Eastside luxury market in 2026, the practical takeaways are:

Inventory is the highest it's been in nearly three years. That's a buyer's-market signal at the upper tier, even though it doesn't show up in headline median price data. You have more to choose from than you would have a year ago.
Sellers are more motivated than the market suggests. A meaningful share of listings at the $5M+ tier are tax-planning sales: owners or estates that need to transact for trust, gifting, or domicile reasons. Negotiation room is real.
The upper-tier days-on-market expansion is a clean signal. When Clyde Hill, Enatai, and Meydenbauer Bay hit 42 days versus 35 a quarter ago, that's the market telling you the bid-ask spread is widening. Patient buyers are getting rewarded.
California and out-of-state buyers are still arriving. Washington's tax picture is worse than it was, but Florida, Texas, and Nevada don't have Bellevue High School. Many of the buyers I work with are still moving here for reasons that taxes don't override: schools, weather, family, careers in tech.

What this means if you're a seller

If you're sitting on a $3M+ Eastside home, the math has changed. Specifically:

The post-July 2026 estate tax reversion to 20% changes the urgency calculus for some owners. If you were planning a sale tied to estate considerations, this is a key date to discuss with your attorney.
REET is meaningfully higher than peer states. On a $5M sale, the seller pays approximately $133,250 in Washington REET. A buyer in Idaho or Wyoming closing the same day pays $0 in transfer tax. That doesn't change whether to sell, but it changes how you think about pricing and what you net.
The 2028 millionaires' tax is creating a planning window. High-income households have effectively two tax years to decide if they want to be Washington residents in 2028. That's pulling some sales forward.
Inventory is up, but quality buyers are still arriving. Properly priced, properly presented homes are still moving. The houses sitting are the ones priced to 2022 expectations.

Three guardrails on all of this

A few honest disclaimers worth making:

Distinguish passed from proposed. The 9.9% capital gains rate, the estate tax overhaul, and the 2028 millionaires' income tax all passed and were signed. The 2025 wealth tax (ESSB 5797) passed the Senate only and was not considered by the House. The 2025 property tax cap repeal (SB 5798) failed.
The 35% estate tax was a one-year window. Decedents dying between July 1, 2025 and June 30, 2026 faced the 35% top rate. After July 1, 2026, the top rate reverts to 20%. The $3M exclusion stays but loses inflation indexing.
Causation is correlational. The IRS and Census data show Washington's high-earner outmigration trend clearly, but housing costs, weather, lifestyle, and the broader "people are moving south" pattern are also drivers. Taxes are part of the story, not the whole story.

The bottom line

Washington in 2026 is two simultaneous stories. One is a structural luxury supercycle: the full 2 Line light rail opened in March, Bellevue School District is again ranked #1 in Washington, the Avenue Bellevue penthouse set a state condo record at $14.35M, and the April 2025 Hunts Point sale set a state residential record at $63M. The other is a tax-driven repositioning at the very top: a billionaire seller saved a substantial sum after redomiciling, a high-profile CEO announced a move the day after the millionaires' tax cleared the House, and Starbucks is locating 2,000 new corporate jobs in Nashville.

If you're navigating either side of an Eastside transaction in 2026, the most valuable thing you can have is an agent who can speak both languages credibly: hyperlocal on neighborhoods and accurate on tax law. That's the conversation I have with most of my clients these days. I'd be glad to have it with you too.

Wendy Klinker | Windermere Real Estate Get in touch to talk specifics.

This post is general market commentary, not tax or legal advice. For your specific situation, please consult a qualified attorney, CPA, or estate planner.

Last updated: May 2026

Sources

Tax law & legislation

Domicile changes & corporate relocations

Want to go deeper on a specific neighborhood?

Medina: the West Coast's billionaire enclave
Clyde Hill: the view ridge of the Eastside
Hunts Point: Washington's most exclusive ZIP
Yarrow Point: "Nantucket on Lake Washington"
Mercer Island: quiet luxury, finally on the rail map
Bellevue: six sub-markets, one city
Kirkland: five sub-markets, one waterfront city