Crypto Taxes in Washington State 2026: The 7% and 9.9% Capital Gains Tax

How Washington Taxes Crypto

Washington is one of the few states with no personal income tax. It does have a separate capital gains tax, run by the Washington Department of Revenue (DOR), on the sale or exchange of long-term capital assets. The Washington Supreme Court upheld it in 2023, and voters kept it in 2024 when Initiative 2109, which would have repealed it, failed.

For crypto, that means two layers. The federal rules apply to every gain, short or long, at the rates in our US crypto tax guide. The Washington tax applies only to long-term gains, and only to the part above the annual deduction ($278,000 for 2025; the state adjusts it for inflation each year).

Washington Capital Gains Tax Rates and Thresholds

The deduction is per individual, married couple, or domestic partnership, not per person in a couple. The 2.9% tier was added by 2025 legislation; see DOR's notice on the new tiered rates.

Washington Capital Gains Tax on Crypto: Gain vs Tax Owed

Washington tax on long-term gains of different sizes, using 2025 figures (single deduction of $278,000; 7%, plus 2.9% on taxable gains over $1 million). It assumes no other long-term gains or losses.

Short-term gains (coins held one year or less) aren't taxed by Washington at all. The return is filed through the Department of Revenue's My DOR portal, by the federal filing deadline.

Does the WA Capital Gains Tax Apply to Crypto?

Generally, yes, for long-term gains. The tax covers long-term capital assets that are not specifically exempt. The exemptions are real estate, retirement accounts, certain livestock, timber, and commercial fishing privileges, depreciable business assets, and goodwill from certain auto dealership sales. Cryptocurrency is not on that list.

• Long-term crypto gains (held more than one year): counted toward the Washington tax.
• Short-term crypto gains (held one year or less): not subject to the Washington tax, but taxed federally at ordinary rates.
• Staking, mining, airdrop, and payment income: not taxed by Washington as income. A crypto business may owe Washington's business and occupation (B&O) tax on its gross receipts, which is a separate question.

Crypto is an intangible asset, so it is generally allocated to Washington if you were domiciled in Washington when you sold it. If you moved in or out during the year, the date of each sale matters.

Worked Examples (2025 Figures)

Example 1: a $150,000 long-term gain

$150,000 is below the $278,000 deduction. Washington tax: $0. You still owe federal tax, probably at 15% or 20%.

Example 2: a $400,000 long-term gain

Taxable Washington gain: $400,000 − $278,000 = $122,000. At 7%, Washington tax: $8,540, on top of federal tax.

Example 3: a $1.5 million long-term gain

Taxable Washington gain: $1,500,000 − $278,000 = $1,222,000.

• 7% on the full $1,222,000 = $85,540
• Extra 2.9% on the $222,000 above $1 million = $6,438
• Washington tax: $91,978

Example 4: a $300,000 short-term gain

No Washington capital gains tax, because the coins were held one year or less. Federal tax applies at ordinary rates of up to 37%. Here holding longer raises the Washington exposure while lowering the federal one, so run both numbers before timing a large sale.

Losses and Netting

Washington starts from your federal long-term gains and losses, so long-term losses in the same year reduce the gain subject to state tax. A long-term crypto loss can offset a long-term stock gain. Short-term results don't enter the Washington calculation. Keep the Form 8949 detail, because the Washington return is built from those federal figures.

How to File the Washington Capital Gains Tax

1. Finish your federal return first so your Schedule D and Form 8949 long-term totals are final.
2. Check whether you're over the deduction. If your long-term gains from non-exempt assets are above the year's standard deduction, you must file.
3. File through My DOR, the Department of Revenue's online portal, and attach a copy of your federal return as DOR requires.
4. Pay by the federal due date. An extension to file doesn't extend the time to pay.
5. Keep records for every crypto sale: purchase date, sale date, basis, and proceeds.

Washington vs Other States for Crypto

For most beginners, Washington is effectively a no-state-tax state for crypto. It matters only if you realize several hundred thousand dollars of long-term gains in a single year.

Who Has to File a Washington Capital Gains Return?

Married couples and registered domestic partners share one deduction, whether or not they file separately federally. Two spouses each realizing $200,000 of long-term gains ($400,000 combined) are over the threshold, even though neither is individually.

Planning Around the Washington Tax

Because the tax applies only above that deduction, timing matters more than anything else. None of this is advice for your situation, but these are the approaches people discuss with their advisers:

• Spread large sales across tax years. Selling $500,000 of long-term gains in one year gives $222,000 of taxable Washington gain (at 2025 figures). Selling $250,000 in each of two years may give none, because each year gets its own deduction.
• Realize long-term losses in the same year. Long-term losses reduce the gain Washington taxes. Selling a long-term loser in the same year as a big winner can lower the state bill as well as the federal one.
• Compare short-term and long-term treatment. For very large gains, selling short-term avoids the Washington tax but raises the federal rate from 20% to as much as 37%. That is rarely a good trade, but calculate it rather than assuming.
• Plan charitable gifts. Washington allows a limited deduction for large donations to qualifying Washington-based charities. Giving appreciated crypto directly to a charity that accepts it can also avoid the gain on those coins federally. Check the current rules with DOR before relying on this.
• Watch the $1 million line. Since 2025, taxable gains above $1 million are taxed at 9.9%. Keeping a year's taxable gains under that line saves 2.9 percentage points on the excess.

Records Washington Expects You to Keep

DOR builds the Washington return on your federal figures, so the federal records do double duty:

• Form 8949 and Schedule D, with each long-term crypto sale listed
• Exchange exports and wallet histories supporting purchase dates, which prove the one-year holding period
• Cost basis records, including fees
• Proof of domicile on the sale date if you moved into or out of Washington that year
• Charity receipts if you claim the charitable deduction

Other Washington Taxes Crypto Holders Should Know

Estate tax. Washington has its own estate tax, with an exclusion far below the federal one. Crypto counts toward a Washington estate like any other asset. Holders with large balances should make sure an executor can find and access the coins, since lost keys mean lost assets.

Business and occupation (B&O) tax. If you run a crypto business in Washington, such as mining for profit, trading as a business, or providing crypto services, the B&O tax on gross receipts may apply regardless of the capital gains tax.

Sales tax. Buying goods with crypto is still a taxable retail sale, and the seller charges sales tax on the dollar price. Separately, spending crypto is a disposal for federal purposes.

Example: Crypto and Stock Gains in the Same Year

A Seattle couple has these 2025 long-term results:

Washington long-term gains: $260,000 + $90,000 − $40,000 = $310,000. After the $278,000 deduction, taxable Washington gain is $32,000, and the tax is $2,240. Without the altcoin loss, the taxable gain would have been $72,000, a $5,040 bill. The rental and the short-term ETH trade are still taxed federally.

A Short History of Washington's Capital Gains Tax

The tax is still subject to legislation and litigation. Check the DOR page each year for the current deduction and any rule changes before filing.

Holding Period and Basis: The Numbers Washington Uses

Washington doesn't have its own rules for measuring a gain. It uses your federal figures, so the federal details decide how much, if anything, Washington can tax:

• The one-year clock starts the day after you acquire a coin. A coin bought on March 10, 2025 becomes long-term on March 11, 2026. Sell it on March 10 and the gain is short-term, which is outside Washington's tax.
• Coins received as income (staking, mining, airdrops, pay) have a basis equal to their value when you received them, and their holding period starts that day. Only the growth after that date is a capital gain.
• Coins moved between your own wallets keep their original purchase date and basis. A transfer doesn't restart the clock.
• Swaps restart the clock. Trading BTC for ETH sells the BTC. The new ETH has a new purchase date, so a swap just before year-end can turn future long-term gains into short-term ones.
• Lot selection matters. If you bought the same coin at different times, the units you're treated as selling decide both the gain and whether it's long-term. Use a consistent, documented method, tracked per wallet or account as the IRS now expects.

Moving Into or Out of Washington

Crypto is an intangible asset, so its gain is generally allocated to the state where you were domiciled when you sold. Domicile means your true, permanent home, not just where you happen to be that day. Two common situations:

Moving to Washington from a state with income tax

Your old state can usually tax sales made while you still lived there. After you become a Washington domiciliary, long-term sales count toward Washington's tax only above the deduction, and short-term sales aren't taxed by Washington. States like California and New York check these moves closely. Keep dated proof of the move: a lease or deed, driver's license, vehicle and voter registration.

Leaving Washington before a large sale

People with big unrealized gains sometimes consider moving to a state with no capital gains tax before selling. The sale date and the date your domicile really changed both matter, and DOR can question a move that looks temporary. Get professional advice before timing a large sale around a move.

Washington Crypto Tax Checklist

1. Export every exchange and wallet history for the year.
2. Split each sale into short-term and long-term using the federal one-year rule.
3. Total your long-term gains and losses from all non-exempt assets: crypto, stocks, funds, collectibles, and so on.
4. Compare the total with the year's standard deduction ($278,000 for 2025).
5. If you're over, file the Washington capital gains return through My DOR by the federal due date and pay 7%, plus 2.9% on taxable gains above $1 million.
6. File your federal return as usual. Federal tax applies to every gain whatever Washington says.

Written by Asad Shaikh

Founder of StartCryptoNow. Nine years researching, trading, and teaching crypto; BSCS from Virtual University of Pakistan. Every tax figure is checked against IRS and state revenue publications. Our editorial policy.