2020 Changes to Seattle Area Real Estate Excise Tax Explained (Snohomish: sales, second mortgage)

[homesinseattle]

For King, Snohomish, Pierce and Thurston Counties (exceptions are Darrington, Skykomish, Eatonville, Rainier).

Real estate excise tax (REIT) is the tax on the sale of real estate, payable by the seller at closing. Currently, both the state and local rates are flat percentages, 1.28% for the state and .50% for the majority of areas in the quad counties. Effective JANUARY 1, 2020, the state component will change to a graduated rate structure.

COMBINED RATES AFTER JANUARY 1, 2020 (sales prices).

$500,000 or less 1.60%
$500,000.01- $1,500,000 1.78%
$1,500,000.01- $3,000,000 3.25%
$3,000,000.01 or more 3.50%

Examples at these sales prices:

$500,000 times 1.6% = $8000 (TOTAL REIT $8000)

$600,000 first $500,000 at 1.6% = $8000 plus remaining $100,000 at 1.78% = $1780 (TOTAL $9780)

$4.4mil First 500k $8K tax, Next 1mil $17,800, next 1.5mil $48,750, final 1.4mil $49,000 (TOTAL $123,550)

[myname_isborat]

Wow, that is a huge jump in rates. Between that and the mortgage deduction gone going to be interesting to see what happens with more expensive homes that are not even anything special at $1.5 million if you are close in.

[homesinseattle]

Originally Posted by myname_isborat

Wow, that is a huge jump in rates. Between that and the mortgage deduction gone going to be interesting to see what happens with more expensive homes that are not even anything special at $1.5 million if you are close in.

Borat, to clarify, here are mortgage interest deductibility laws now:

Interest payments are deductible on mortgage debt of up to $750,000—formerly $1,000,000
Married couples filing separately can deduct interest on up to $375,000 each—formerly $500,000
Up to 2025, these new limits won't apply to mortgages originated before December 15, 2017
Deduction for other home equity debt (HELOCs and second mortgages) eliminated—formerly $100,000
In the short term, these changes only affect people who take out new purchase mortgages. Anyone who purchased a home before December 15, 2017 will be able to deduct mortgage interest payments on up to $1 million in debt, up until 2025. Even if you refinance, the old limit applies as long as the original debt was taken on before December 15, 2017. Finally, people who closed on a home purchase before January 1, 2018 can also use the old limit of $1 million—provided they purchase the residence by April 1.

Besides reducing the maximum deduction for mortgage interest, the new rules completely eliminate the deduction for interest paid on other home equity debt. Previously, taxpayers could deduct up to $100,000—$50,000 for married couples filing separately—on the interest payments for home equity loans and home equity lines of credit (HELOCs).

[wahoyaho]

I'm fine with taxing higher value homes. But where is the tax money going to?

[homesinseattle]

Originally Posted by wahoyaho

I'm fine with taxing higher value homes. But where is the tax money going to?

Waho, I found this on the WA State website, looks like most of it just goes into the general fund:

"How funds are used

1.3% of the state tax collected by counties is retained to cover administration costs. Of the net proceeds to the state, 2% goes into the public works assistance account, 4.1% to the education legacy account with remaining amounts going the general fund".

[leastprime]

I voted, No.