Is there a capital gains tax on inheritance in Washington state?
No. You do not pay capital gains tax simply because you received an inheritance. Capital gains tax only applies in the case of selling the asset later for more than its value on the day the original owner died. IRS rules set the starting value — basis — at the fair market value from that specific date — for most assets.
Are people confusing capital gains with Washington’s death tax?
Yes. Washington does not charge an inheritance tax to the people who receive the assets. The "death tax" people frequently mention is actually the Washington estate tax. The estate pays that bill before you get the share.
Which tax is it?
The Washington Department of Revenue publishes the Washington breakdown below.
What should an heir keep for tax time?
Save the presented documents below in a folder. They serve as proof in the case of necessity to support the numbers on a future tax return.
- Brokerage statement / official appraisal presenting the value on the date of death
- Forms 1099-R for any inherited retirement distributions
- Forms 1099-INT & 1099-DIV for interest / dividends earned after you inherited the asset
- Schedule K-1s if you received a share in a partnership or S corporation
Clarity Tax Group can review your inheritance situation
Do you want a concrete answer on how the inheritance impacts your taxation? Contact Clarity Tax Group today to schedule a review. Our team stands ready to present smart next actions.