Washington has no personal income tax, and — importantly — it exempts direct sales of real estate from its 7% long-term capital gains excise tax. That means a property sale is taxed only at the federal level (23.8% on the gain). A 1031 exchange into a Delaware Statutory Trust defers that federal tax and moves Washington investors out of active landlording into passive institutional real estate.
The Washington tax math
Here's the tax stack on a long-held rental sold for a $1.5M gain (excludes depreciation recapture, taxed separately at up to 25%):
| On a $1.5M gain | Tax |
|---|---|
| Federal long-term capital gains (20%) | $300,000 |
| Net investment income tax (3.8%) | $57,000 |
| Washington state tax | $0 |
| Total if you simply sell | $357,000 |
| Tax if you 1031 into a DST | $0 deferred |
Even with no Washington income tax, the federal bill on a large gain is real — $357,000 on a $1.5M gain — versus $0 now with a qualifying exchange. Run your Washington numbers →
Washington 1031 rules
Rules summarized as of 2026 — verify with your tax advisor.
Conforms to federal §1031
Washington has no income tax and its 7% capital gains excise tax (RCW 82.87) exempts real estate, so a property sale is taxed only federally; a 1031 exchange defers that federal tax. Note: the 7% tax can apply to gains on non-real-estate assets above the annual threshold.
Withholding at sale
None at the state level on real estate.
How gains are taxed
No state income tax. Washington's 7% capital gains excise tax applies to stocks and business interests but EXEMPTS direct sales of real estate.
Washington market snapshot
Illustrative — wire to a market-data feed; refreshed quarterly.
Baker 1031 in Washington
Realized (acquired, held, sold) programs on Washington assets. Joined from full-cycle-deals.csv; sponsor-reported, net-to-investor, not independently verified; past performance ≠ future results.
| Program | Sponsor | Avg annual | Equity × | Hold |
|---|---|---|---|---|
| Valley Townhomes — Puyallup | Bluerock | 9.40% | 1.78x | 11.33 yr |
| Starboard Mountain Ranch DST — Richland | Starboard | 10.29% | 1.45x | 3.79 yr |
| Navigator Villas — Pasco | Bluerock | 14.81% | 2.16x | 4.67 yr |
See every Washington deal in the Data Center →
Current offerings for Washington investors
| Offering | Sponsor | Type | Status |
|---|---|---|---|
| ExchangeRight Net-Leased All-Cash 19 DST | ExchangeRight | Net Lease | Limited Availability |
| Starboard Bradley DST | Starboard Realty Advisors | Multifamily | Available |
| AX Essential Retail Portfolio DST | Apollo Global Management | Net Lease | Available |
DST sponsors based in Washington
Learn more
Washington FAQ
Does Washington's 7% capital gains tax apply when I sell real estate?
No. Washington's 7% long-term capital gains excise tax (RCW 82.87) specifically exempts direct sales of real estate. A property sale is taxed only at the federal level — up to 23.8% on the gain — which a 1031 exchange can defer.
Does Washington have a state income tax?
No. Washington has no personal income tax. The only state-level tax on investment gains is the 7% excise tax, and real estate is exempt from it.
Should I still do a 1031 exchange in Washington?
Yes — to defer the federal tax (up to 23.8%) and shift from active management to passive, institutional real estate while keeping your full equity invested.
Disclosures
This page is educational and is not investment, tax, or legal advice, or an offer to sell or a solicitation to buy any security. State tax and 1031 rules summarized here are general, current as of 2026, and not tax advice — verify with your CPA and attorney. For accredited investors only. Representatives may transact business only in states where registered or exempt. Securities offered through Aurora Securities, Inc., member FINRA/SIPC; Baker 1031 Investments, LLC is independent of Aurora. Performance shown is sponsor-reported, realized programs only, net of fees, not independently verified, and not indicative of future results.