Washington Real Estate Excise Tax on an Apartment Sale, Including LLC Transfers
Washington charges a real estate excise tax on every sale of real property, and since 2020 the state portion has been graduated. Under the brackets in place since 2023, it rises from 1.1 percent on the first $525,000 of the price to 3 percent on everything above $3,025,000. On a large apartment sale, most of the price lands in the top bracket, so the tax behaves much more like a 3 percent cost than the 1.1 percent figure owners remember from small residential sales. Local excise taxes are added on top, at rates that vary by city and county.
Take a complex that sells for $10 million, where the state tax comes to $5,775 on the first $525,000, $12,800 on the next $1 million, $41,250 on the next $1.5 million and $209,250 on the remaining $6,975,000, for a total of about $269,075 before any local tax. That works out to roughly 2.7 percent of the price in state tax alone, and a pro forma that assumes a 1 or 2 percent sale cost at exit understates what the sponsor will actually take home.
The seller usually pays the tax, but if the seller does not, the buyer becomes responsible, and unpaid tax can become a lien on the property. For a buyer, that makes the excise tax a closing issue as well as an exit cost, because the settlement statement has to show the tax paid in full before the deed records cleanly.
The thresholds move every four years, and for sales beginning January 1, 2027, the brackets rise to $551,000, $1,551,000 and $3,051,000, with the same rates of 1.1, 1.28, 2.75 and 3 percent. The adjustment helps slightly at the lower brackets but changes almost nothing on a large building, where the bulk of the price still falls in the 3 percent tier.
Buying the entity that owns the building does not avoid the tax, because a controlling interest transfer, meaning a change of 50 percent or more in the ownership of an entity that owns real property in the state, is taxed as if the real estate itself had been sold. The Department of Revenue measures that change over a 36-month lookback period, so several smaller transfers among partners can add up to a taxable event even when no single sale crosses the line.
Controlling interest transfers are taxed on the true and fair value of the real estate the entity owns, not on the price paid for the ownership interest, and the return and payment are due within five days of the transfer. That deadline is far shorter than most buyers expect, and missing it brings penalties that climb to 5 percent after one month, 10 percent after two and 20 percent after three, plus monthly interest.
The 36-month rule reaches transactions that sponsors do not think of as sales, including partner buyouts, recapitalizations that bring in a new equity partner and restructurings that shift control between affiliated entities. Any change in ownership of an entity that holds property in the state should be checked against the lookback before it closes, because the tax can arrive on a transaction that moved no deed at all.
Local excise taxes change on their own schedule, and the Department of Revenue publishes rate tables that can change several times in a single year, so the combined rate on a sale depends on both the location and the date of closing.
Before you price an acquisition, add the excise tax your exit will cost at the projected sale price, using the current state brackets and the local rate for the property's location. If the deal involves buying an interest in an entity rather than a deed, or if partners will change during the hold, have counsel review the controlling interest rules and the 36-month lookback before you sign, and calendar the five-day filing deadline for any transfer that triggers the tax.
The excise tax also changes how you compare exit options, since every dollar of price above the top threshold is taxed at 3 percent and a large enough partner buyout can carry the same cost as a sale. I help apartment sponsors build CRE models that carry the excise tax and local rates into the exit, so the projected proceeds match what investors will actually receive. If you are buying, selling or recapitalizing a property here, send the deal to amer@awadcapitaladvisors.com, and I can help you see what the exit really nets.