Washington state Long-term Capital Gains Tax

[pamdory]

I'm trying to confirm the filing threshold for this new tax.  Per the text of the law the penalty is assessed if a return isn't filed if tax is owing.  There is a $250,000 deduction per tax return,  so I'm hoping that means if you don't owe the tax, you don't need to file.  

Can anyone confirm this for me?

[qbteachmt]

Did you look at WA resources?

https://dor.wa.gov/taxes-rates/other-taxes/capital-gains-tax

https://dor.wa.gov/taxes-rates/other-taxes/capital-gains-tax/do-you-owe-capital-gains-tax

"Amount

• Was your amount of Washington state long-term capital gains more than $250,000 after all exemptions, such as real estate or investments held in individual retirement accounts? See RCW 82.87.050.

If you answered Yes to the above question, you may owe Washington state capital gains tax."

https://dor.wa.gov/taxes-rates/other-taxes/capital-gains-tax/frequently-asked-questions-about-washin...

"How are exemptions to the capital gains tax applied?

Exemptions from Washington’s capital gains are based on transactions. This means you may owe capital gains tax on some transactions and not on others."

"Deductions and exemptions
There are several deductions and exemptions available that may reduce the taxable amount of long-term gains, including an annual standard deduction of $250,000 per individual. In the case of spouses or domestic partners, the combined standard deduction is limited to $250,000 whether they file joint or separate returns."

It's been challenged and ruled unconstitutional and invalid, but there is a stay on that action, so for right now, it applies.

[pamdory]

Thank you for your reply.  I did review these resources.  However they seem to all refer to whether you may OWE the tax.  

Many tax returns have a filing requirement even when no tax is owed as the taxpayer has to file the return to prove that fact by providing information about basis and deductions.  I'm trying to determine if such a filing requirement exists for this tax. 

[qbteachmt]

Did you understand this part:

"How are exemptions to the capital gains tax applied?

Exemptions from Washington’s capital gains are based on transactions. This means you may owe capital gains tax on some transactions and not on others."

You might need to work through the form to see what applies or is excluded. There is no one answer. Well, there is one answer = It Depends.

[qbteachmt]

This topic includes the ability to Vote to include this in Lacerte, and that the ruling was made just today, and the provision is upheld. You should vote:

https://proconnect.intuit.com/community/lacerte-tax-idea-exchange/wa-capital-gains-tax-available-to-...

[pamdory]

Yes, the exemptions apply to certain types of holdings.  I've reviewed the form, and actually don't have any clients that have a liability.  My main concern was whether my client who has $377k worth of proceeds, but a $1,300 net long-term loss had to file at all.  I'm going with the penalty section of the law that says the penalty arises when there is a tax owed and no return is filed. 

Meaning - no taxable gains, no return necessary.

[qbteachmt]

I haven't worked through many scenarios, but I can see how taking a net first is not meeting the requirement that some transaction by itself might be reportable. That's my cautionary comment.

[pamdory · Accepted solution]

Well I finally noticed this sentence that answered my initial question:

"Only individuals owing capital gains tax are required to file a capital gains tax return, along with a copy of their federal tax return for the same taxable year. "

This page has a good description of the calculation if you click on the "File a capital gains tax return without access to the account" button towards the bottom of the page:

https://dor.wa.gov/manage-business/my-dor-help/capital-gains-my-dor-help

[qbteachmt]

"Well I finally noticed this sentence that answered my initial question:

"Only individuals owing capital gains tax are required to file a capital gains tax return..."

You mean how they tell you a business would not be responsible, and this is for individual taxpayer and not business...

"This tax only applies to individuals. However, individuals can be liable for the tax because of their ownership interest in a pass-through or disregarded entity that sells or exchanges long-term capital assets. The tax only applies to gains allocated to Washington state."

[qbteachmt]

I provided this link previously:

https://dor.wa.gov/taxes-rates/other-taxes/capital-gains-tax/do-you-owe-capital-gains-tax

Did you report LTCG to the Feds? If so, the type of asset and your status for being a WA resident are taken into consideration; then the amount after evaluating for the exemptions, would be analyzed.

Then, if you, the individual, owes, you would file. If you, the individual, do not owe, you don't need to file. There is no generic reporting requirement. Only a filing requirement, if you owe.