We have received some questions since our last post about the new Washington State capital gains tax. After discussing with business owners, I can certainly see how easy it is to get confused from inaccurate information. Let’s go straight to the source, this is the 3-page summary of the law on the Washington legislature site. I have good news for many of you, this text is pulled directly from the 3-page summary:
A deduction is provided for the sale of substantially all of a qualified family-owned small businesses. A qualified family-owned business is a business where:
- the owner of the business held a qualifying interest for at least five years immediately before the sale or transfer of the business;
- the owner of the business or their family member materially participated in operating the business for at least five of the last ten years; and
- the business had worldwide gross revenue of $10 million or less in the 12-month period preceding the sale or transfer of the business—beginning with taxes due and payable in 2024, the $10 million amount is adjusted annually by inflation.
To summarize, if your revenue is $10M or less and you owned and worked in your business for 5+ years then the sale of your business is excluded from the new Washington State Capital Gains tax.
I hope you are exhaling! I was surprised to see so much inaccurate information and scare tactics directed at business owners (and other audiences) about this online. I have had my CPA license now for 16 years. On our site we explain more about our credentials, background, and expertise – it is our continuous, life-long investment in doing right by you and the community of business owners we serve.
Note it takes effect on January 1, 2022, and the first payments are due on or before April 17, 2023.
Capital Gains Tax – Federal
Switching to the Federal Capital Gains tax, there is a lot of news in the media and chatter amongst business owners and the advisory community about proposed changes. If you want to read more detail from a reputable source now, here is one we as CPAs recommend.
Executive summary: Federal capital gains rates will be higher. The changes could be retroactive. For those considering a 1031 “like kind” exchange of commercial real estate – these may be curtailed.
Expect a whole lot of horse trading over the details on this one. There has not been a lot of movement from Congress on this yet, I anticipate a lull in debate on this topic over the summer before things really heat up in September. I will write more about this topic as it develops.
That is it for today – more to come in a future post. As always, thank you for reading!
At Washington Business Brokers we are experts in valuation, optimizing a business for sale, buyer identification and qualification, negotiation, deal structuring, and closing. Our strategic advisor, Glen Cooper, has sold 500+ businesses in his career and is a nationally recognized author and trainer in selling private businesses.
We do not sell you on selling your business or buying one. Instead, we listen, provide options and expertise, and ultimately partner with you to accomplish your goals.
If you would like to better understand the value of your business or learn more about the process of confidentially selling:
call or text 937.344.8750
email [email protected]
or schedule time for an exploratory chat at calendly.com/ryanhemmert