A few days ago, while having coffee in the church fellowship hall, a church member asked me with a worried look if the Washington State inheritance tax, which is at a maximum of 35%, applies to us since we own a house.

I remember seeing that article last year as well. However, upon looking into it, I found that the situation has changed a bit. Today, I want to clarify this step by step.

First, the figure of 35% was indeed a real thing. In 2025, the state legislature passed Bill SB 5813, raising the maximum tax rate from 20% to 35%.

This 35% rate applied to estates exceeding $9 million after deductions. The effective date was for those who passed away after July 1, 2025.

Under the same law, the basic exemption amount also increased from $2,193,000 to $3 million. Many were pleased that the long-stagnant exemption amount finally went up.

However, on March 24 of this year, Governor Ferguson signed SB 6347, which lowered the tax rate again. For those who pass away after July 1, 2026, the tax rate will revert to between 10% and 20% as it was before.

This reduction was signed alongside SB 6346, which imposes a 9.9% tax on household income exceeding $1 million starting in 2028, effectively lowering one while creating another.

So, as it stands now, the maximum tax rate is 20%. The 35% rate only applies to estates of those who passed away between July 1, 2025, and June 30, 2026.

If you lost a family member between last summer and this June, the situation is different. Even if the estate is still being settled, the tax rate schedule from that period still applies, so those individuals should definitely recalculate.

According to the new tax rate schedule, the first $1 million is taxed at 10%, with subsequent brackets at 14%, 15%, and 16%. The portion exceeding $9 million is taxed at the maximum rate of 20%.

Many people get confused here. This tax rate is not applied to the entire estate but rather to the remaining amount after deductions and various exemptions.

The exemption amount varies slightly depending on the date of death. If the death occurs between January 1 and June 30, 2026, the exemption is $3,076,000; if after July 1, it is $3 million.

Since the new law, this $3 million exemption has not been adjusted for inflation and is effectively stagnant. While home prices continue to rise, the exemption amount remains the same, which is honestly a bit disappointing.

It's also important to remember that the reporting standard is based on the total value of the estate, not the net assets. This includes everything from the house, bank deposits, retirement accounts, to life insurance payouts.

Considering the home prices in the Puget Sound area, $3 million is not that far off. When you combine the value of a house with retirement accounts and insurance payouts, you can quickly reach that amount.

And don't confuse this with federal estate tax. The federal exemption is $15 million per person as of 2026, so most families don't have to worry about federal taxes.

The issue is that even if you owe no federal tax, you may still owe Washington State inheritance tax. The two systems operate completely separately.

If you are married, you need to be even more careful. Washington State does not have a provision for the surviving spouse to inherit the deceased spouse's exemption amount.

Property transferred between spouses may not incur immediate taxes due to the spouse exemption. However, when the second spouse passes away, only one person's exemption remains, so planning ahead is necessary.

Additionally, Washington State does not have a gift tax. Therefore, some people are considering ways to distribute their assets to their children while they are still alive.

The reporting and payment deadline is nine months from the date of death. Even if you owe no taxes, you must file if you exceed the threshold.

If you apply for an extension, you can delay the submission of the report by an additional six months. However, this does not postpone the tax payment, so interest accrues daily after the nine-month period.

After handling a funeral and going through a few hectic months, nine months can pass by very quickly. It would be good to inform the remaining family members about the location of the documents to avoid missing the deadline.

You can check the exact exemption amounts and tax rate schedules on the Washington State Department of Revenue's inheritance tax page, which varies by date of death. Make sure to look at the relevant date.

Given that the law has changed twice in one year, I think it could change again in the future. Don't panic or feel relieved based on just one article title; it's most important to develop the habit of checking the latest standards.

Inheritance planning can greatly vary based on the composition of assets, family situation, and time of death. Since it differs by individual circumstances, be sure to consult with an estate planning attorney or tax professional.

If it were me, I would first list the house, accounts, and insurance on one sheet to see how close I am to the $3 million total. If I am close, I think the next step would be to schedule a consultation with a professional.

That day, I told the church member not to worry too much, but to at least get organized. Knowing in advance can make things much easier for the remaining family.