Understanding Washington State’s Real Estate Excise Tax (REET)
Washington State’s Real Estate Excise Tax (REET) is a tax on the sale of real estate that significantly impacts property transactions. Here’s what you need to know:
Current REET Rates (As of 2023)
- 0.5% for properties selling for $500,000 or less
- 1.1% for properties between $500,000 and $1.5 million
- 1.28% for properties between $1.5 million and $3 million
- 3.0% for properties above $3 million
Key Points About REET
- The seller typically pays the tax
- Tax is calculated on the selling price
- Local jurisdictions may add additional REET
- Most cities charge an additional 0.25% to 0.5%
Frequently Asked Questions
Q: Who pays the REET in Washington State?
A: The seller typically pays the REET, though this can be negotiated in the purchase agreement.
Q: Are there any exemptions to REET?
A: Yes, including gifts of property, inheritance, and certain transfers in divorce proceedings.
Q: When is REET paid?
A: REET must be paid at the time of sale, typically during closing.
Q: How is REET calculated on land with improvements?
A: REET is calculated on the total selling price, including both land and improvements.
Q: Can REET be financed?
A: No, REET must be paid in full at closing and cannot be financed.
Q: Are there any special REET rates for first-time home buyers?
A: No, REET rates are the same regardless of buyer status.
Q: How does REET affect property flipping?
A: Investors must factor REET into their profit calculations as it affects the overall transaction cost.
The Bottom Line
Washington State’s REET is a significant cost consideration in real estate transactions. The graduated rate structure means higher-value properties face higher tax rates. Buyers and sellers should carefully calculate REET when planning transactions and factor it into their negotiations and investment decisions.