If your financial advisor told you the federal estate tax is not your problem, they were probably right. What they may not have mentioned is that Washington runs its own estate tax, on its own schedule, with a threshold that sits millions of dollars below the federal one. At Lewis Group CPAs, we have worked with Southwest Washington families and business owners since 1994, and this is one of the widest gaps we see between what people assume and what the law actually says. The rules also changed twice in twelve months. If you last looked at this in 2025, what you learned is out of date.
2026 is a split year in Washington
In May 2025, Senate Bill 5813 raised Washington’s applicable exclusion from $2.193 million to $3 million and lifted the top estate tax rate from 20% to 35%. That top rate made Washington’s the highest state estate tax rate in the country. It lasted one year. Senate Bill 6347, signed March 24, 2026 as Chapter 209, Laws of 2026, undid the rate increase. Which rules apply to an estate depends entirely on the date of death:
- Deaths January 1 through June 30, 2026:Â exclusion of $3,076,000, graduated rates from 10% up to a top rate of 35%.
- Deaths on or after July 1, 2026:Â exclusion of $3,000,000, graduated rates from 10% up to a top rate of 20%.
For a large estate, that is a meaningful difference in tax on the same set of assets, decided by a date nobody chooses. The current figures and the rate tables are on the Washington Department of Revenue estate tax page.
The gap between Washington and the federal threshold
For deaths in 2026, the federal estate tax exclusion is $15 million per person, made permanent by the One Big Beautiful Bill Act in July 2025 and indexed for inflation going forward. Very few families come close to that. Washington’s is $3 million. So a $6 million estate owes nothing federally and can face a real Washington bill. In Clark County, where a paid-off house, a retirement account, a life insurance policy, and a business interest add up faster than most people expect, $6 million is not an unusual number.
| 2026 | Federal | Washington |
|---|---|---|
| Exclusion | $15,000,000 | $3,000,000 (deaths on or after July 1) |
| Top rate | 40% | 20% |
| Portability between spouses | Yes | No |
| Indexed for inflation | Yes | No |
| State gift tax | Federal gift tax applies | None |
| Return due | 9 months after death | 9 months after death |
The exclusion is now frozen, and that matters more than the rate cut
SB 5813 was written to index Washington’s exclusion for inflation. SB 6347 removed the increase and left the indexing tied to a discontinued CPI series, so the Department of Revenue states the $3 million figure is not set to increase going forward. The same is true of the family-owned business deduction described below. A frozen exclusion in a market where property values keep climbing means more estates cross the line every year without anyone getting richer in real terms. The rate cut is the headline. The freeze is the part that changes the math for people who are under the threshold today.
The rule that surprises almost everyone
Federal law has portability. If the first spouse to die does not use their full exclusion, the survivor can claim what is left, effectively doubling the family’s shelter. Washington has no portability. If the first spouse’s estate passes everything outright to the survivor and no planning was done, that first $3 million exclusion is simply gone. The survivor dies with one exclusion instead of two, and the family loses the benefit permanently. This is fixable, but only in advance, and usually through the structure of the estate documents themselves. A credit shelter arrangement or a Washington QTIP election preserves the first exclusion, and both require the conversation to happen while both spouses are living. It is not something anyone can repair after a funeral.
Your gross estate is bigger than your net worth feels
When people estimate their estate, they usually think of the house and the investment accounts. The taxable estate is broader. It generally includes:
- Retirement accounts, including IRAs and 401(k)s, at full value
- Life insurance death benefits, if you own the policy
- Business interests, including closely held stock and LLC membership
- Real property in any state, at fair market value
- Personal property of real value, such as equipment, vehicles, and collections
That last category matters for the trucking companies, contractors, and restaurant owners we work with in Vancouver, Camas, Washougal, Battle Ground, La Center, and up into Cowlitz County. Equipment-heavy businesses carry value that never shows up on a personal balance sheet until someone has to appraise it. Washington does offer relief. The state allows a qualified family-owned business interest deduction, which the Department of Revenue calculated at $3,076,000 for 2026 dates of death, plus a separate deduction for qualified farm property. Both come with ownership, material participation, and holding requirements that have to be satisfied before death. Nobody qualifies by accident, and the requirements look backward at how the business was actually run, not at how it was described.
Why a fall review is the right timing
The moves that reduce a Washington estate tax bill need time to work. Lifetime gifting. Washington has no gift tax. Money you give away during life generally leaves your Washington taxable estate. Federal gift rules still apply, and the annual exclusion is $19,000 per recipient for 2026, so a married couple electing gift splitting can move $38,000 to each child or grandchild per year without touching their lifetime federal amount. The IRS gift tax guidance covers the reporting rules. Gifting works because it compounds across years, which is why starting in November beats starting in a hospital. Structure changes. Credit shelter arrangements, Washington QTIP elections, moving a policy out of your own name, retitling property, tightening up an LLC operating agreement. These depend on documents being signed and, in some cases, on time passing before the benefit is secure. Valuation clarity. If you own a business, someone will eventually have to put a number on it. Knowing that number now tells you whether you have a problem at all. A fall review also lines up with the calendar. Gifts have to be completed by December 31 to count for the year, and starting the conversation before tax season means we can fold what we find into your regular planning rather than bolting it on in April.
Frequently asked questions
What is Washington’s estate tax exemption for 2026?
$3,076,000 for deaths from January 1 through June 30, 2026, and $3,000,000 for deaths on or after July 1, 2026.
Did Washington’s estate tax rate really go back down?
Yes. SB 6347 returned the top rate to 20% for deaths on or after July 1, 2026, one year after SB 5813 had raised it to 35%.
Does Washington have estate tax portability between spouses?
No. Unused exclusion from the first spouse to die is lost unless the estate documents were structured in advance to preserve it.
Does Washington have a gift tax?
No. Washington imposes no state gift tax, so lifetime gifts generally reduce the Washington taxable estate. Federal gift tax reporting rules still apply.
When is the Washington estate tax return due?
Nine months after the date of death, along with payment.
Is my IRA part of my Washington taxable estate?
Yes. Retirement accounts are included at full value, which is one of the main reasons people underestimate their exposure.
Let’s find out where you actually stand
An estate tax review with us starts with an honest inventory: what you own, how it is titled, where it sits, and what it is worth. From there we run the Washington numbers, show you where you sit against both the state and federal thresholds, and coordinate with your attorney on anything that requires new documents. Everything moves through our own secure client portal, so your documents stay tracked and in one place. If you also own property in Oregon, there are separate consequences we should look at, and we handle both sides of the river. Mention it when you call. We have five licensed CPAs on staff and belong to the Washington Society of CPAs, the Oregon Society of CPAs, and AICPA & CIMA. The same inventory supports your annual return, so ask about our tax preparation services when you call. For business owners who want this handled continuously rather than once a year, our virtual CFO services cover it. Reach out to schedule your estate tax review this fall. Visit lewisgroupcpas.com/contact/ or call (360) 896-8221. The planning that helps is the planning you do early. Current as of September 2026. Estate tax figures change; confirm current amounts before acting.
