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Washington runs the strangest state tax structure in crypto: no income tax at all, but a 7% excise tax on long-term capital gains above an indexed deduction, $278,000 for 2025, rising to 9.9% on taxable gains over $1 million. Short-term gains and staking income escape the state entirely. Holding-period proof, per lot, decides whether Washington taxes a sale at all.
Seattle crypto investors face a state tax structure no other state has: Washington taxes no wages and no short-term gains, but levies a 7% excise tax on long-term capital gains above a $278,000 deduction for 2025, rising to 9.9% on taxable gains over $1 million. Holding period, proven per lot, decides whether Washington taxes a sale at all. Count On Sheep, a USA-based team with former Big 4 leadership, rebuilds wallet, exchange, and DeFi history into CPA-ready Form 8949, Schedule D, and Schedule 1 inputs for Seattle investors, with the lot-level dates that drive both the federal return and the separate Washington capital gains filing. We do not file. Your CPA files, or you file with TurboTax.
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Before you file yourself or hand anything to a CPA, the crypto activity has to be reconciled. That is how Seattle investors avoid duplicate disposals, unsupported basis, overstated gains, and preventable tax. Clean records improve accuracy, preserve legitimate deductions and losses, and let you reconcile each 1099-DA against the complete transaction history.
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Seattle is an engineer town with a tax structure that exists nowhere else. Washington taxes no wages and no short-term gains, then taxes large long-term gains through an excise tax with its own deduction, its own return, and its own audit trail. Per-lot dates carry more weight here than in any other state.
The investor base is heavy on software money. Amazon's headquarters anchors South Lake Union, Microsoft sits across the lake in Redmond, and Google, Meta, and a long tail of startups run large Seattle engineering offices. The typical client profile is an engineer with vesting RSUs, a decade-old Coinbase account, a hardware wallet, and a few years of DeFi experiments across chains. Each piece is manageable; the combination is what breaks consumer software.
The tax structure is the part outsiders get wrong. Washington's capital gains excise tax took effect in 2022, survived the state Supreme Court in March 2023, and survived the voters in November 2024 when Initiative 2109 failed. It applies a 7% rate to long-term gains above the standard deduction, $278,000 for 2025, and a 2025 law added 2.9% on taxable gains over $1 million. Real estate and retirement accounts are exempt. Crypto is not: it is intangible property, allocated to Washington when the owner is domiciled here at the time of sale.
The mechanics reward documentation obsessively. Only long-term gains count, so a lot's acquisition date determines whether a sale is Washington-taxable at all. The deduction means lot selection changes the state bill: a Seattle investor who realizes $270,000 of long-term gains in 2025 owes Washington nothing, while $500,000 of the same gains owes $15,540. Specific identification, supported per lot, is what turns those decisions from guesses into filings.
The deliverable covers both governments. We rebuild wallet, exchange, and DeFi history into per-lot Form 8949 detail, Schedule D totals, and Schedule 1 items, with holding periods documented well enough to drive the federal return and the separate Washington capital gains filing. Your CPA files both, or you file federally with TurboTax and handle the state return with the numbers we hand you.
Seattle residents pay federal capital gains of up to 23.8% including the net investment income tax. Washington adds no income tax on wages or short-term gains, but long-term capital gains above the 2025 standard deduction of $278,000 face a 7% excise tax, with a 2.9% surtax on taxable gains over $1 million.
| City | State + local tax | Federal (LTCG + NIIT) | Total tax | Extra cost vs Austin |
|---|---|---|---|---|
| Seattle | $15,540 (7% above deduction) | $119,000 (23.8%) | $134,540 | +$15,540 |
| San Francisco | $66,500 (13.3%) | $119,000 (23.8%) | $185,500 | +$66,500 |
| Austin | $0 | $119,000 (23.8%) | $119,000 | Baseline |
Illustrative math at top rates. Federal assumes the 20% long-term rate plus the 3.8% net investment income tax. The Seattle figure applies Washington's 7% to the gain above the 2025 standard deduction of $278,000. Taxable gains over $1 million pay 9.9% on the excess. Short-term gains face no Washington tax but are taxed federally as ordinary income.
The Washington tax starts from federally reported net long-term capital gains, so federal characterization and per-lot holding periods flow directly into the state calculation. Real estate and retirement accounts are exempt; crypto, as intangible property, is covered and allocated by domicile at the time of sale.
What this means in practice: Washington is the only state where holding period decides whether the state taxes a gain at all. Long-term lots above the deduction pay 7% to 9.9%; short-term lots pay Washington nothing but face federal ordinary rates up to 40.8%, so nobody should hold short on purpose. The real lever is proof: per-lot acquisition dates, specific identification, and clean transfer reconciliation determine both the federal rate and the entire Washington bill. That documentation is the deliverable.
A lot held 366 days is Washington-taxable above the deduction; a lot held 364 days is not, though it costs more federally. Acquisition dates that survive wallet transfers are the whole game, and we reconcile them per lot.
Which lots you dispose of, and in which year, moves gains above or below the indexed deduction. Specific identification only works when the records support it. We build the documentation that makes your CPA's planning executable.
Amazon and Microsoft vesting schedules create big wage years next to crypto disposals. Vesting itself is wage income Washington does not tax, but sold shares held over a year join crypto in the same capital gains calculation. We keep the crypto side clean so the combined picture is accurate.
Since 2025, taxable gains over $1 million pay the 2.9% surtax on top of 7%. Founders and early employees exiting large positions need per-lot numbers early enough for their CPA to model timing across years.
Washington allocates crypto gains by where the owner is domiciled at the time of sale. Moves into or out of the state around large disposals need dates that hold up, on both the residency file and the trading ledger.
Staking rewards and airdrops face no Washington tax, but federally they are ordinary income at fair market value on receipt, and they set the basis for later sales that may be Washington-taxable. We price and track both ends.
Reviewed August 2026. These first-party resources support the general federal and state information on this page. Your CPA applies the current instructions to your return; Count On Sheep supplies the reconciled crypto records and form-ready inputs.
Follow the Seattle service path into the national forms, basis, DeFi, and reconciliation guidance behind the local engagement.
See how Count On Sheep turns exchange, wallet, DeFi, NFT, and income activity into one CPA-ready reconciliation package.
Understand broker-reported proceeds, transferred assets, missing basis, and the records needed to reconcile the form.
Follow the evidence path from prior exchanges and self-custody wallets to supported Form 8949 basis.
Learn what to preserve for liquidity pools, staking, lending, bridges, NFTs, and related income or disposal events.
Review the Form 8949, Schedule D, income, cost-basis, and supporting workpapers delivered after reconciliation.
From anywhere in Washington.
You connect read-only access to your exchanges and share wallet addresses. CSV exports work too.
We pull and reconcile every wallet, exchange, and DeFi interaction into one ledger with cost basis, holding period, and proceeds per lot.
A senior crypto tax service specialist reviews edge cases. Manual basis splits, DeFi classifications, bridge events, restaking, NFTs.
You get CPA-ready Form 8949, Schedule D, Schedule 1 inputs (and Schedule C for mining), plus full workpapers. Hand to your CPA, or load into TurboTax.
For time and efficiency, all Count On Sheep meetings are held by video conference. This lets our specialists review your situation securely, share screens when useful, and serve you without travel or office delays.
Only one slice of it: net long-term capital gains above the standard deduction, $278,000 for 2025, taxed at 7% and at 9.9% above $1 million of taxable gain. Wages, short-term gains, staking rewards, and mining income face no Washington tax.
No. The Washington return is filed with the Department of Revenue separately from the federal return. We deliver the reconciled numbers behind it: per-lot long-term gains with documented holding periods. Your CPA files, or you file yourself.
$278,000 of net long-term capital gains, indexed annually for inflation. Only gains above that amount are taxed, which is why lot selection and disposal timing are worth real money for Seattle investors with large positions.
No. The excise tax applies only to long-term gains. Short-term gains still face federal ordinary rates up to 37% plus the 3.8% net investment income tax, which is far more than the Washington layer, so holding short to dodge the state tax is bad math. Your CPA runs that analysis; we supply the per-lot data.
A 2025 law added a 2.9% surtax on taxable long-term gains over $1 million, on top of the base 7%, retroactive to January 1, 2025. The first $1 million of taxable gain stays at 7%. Large exits now have a real state planning dimension in Washington.
Vesting is wage income, which Washington does not tax. But if you sell vested shares after holding them more than a year, those long-term gains join your crypto gains in the same Washington calculation. The combined number is what crosses or misses the deduction.
Washington allocates intangible gains by domicile at the time of sale, and California taxes what you sold while still a Californian, with the FTB auditing exactly that timeline. Per-lot disposal dates against the move date are the record both states end up asking about.
Federally yes: ordinary income at fair market value when received, reported through Schedule 1. Washington does not tax them, but the received value becomes cost basis, and a later long-term sale of those coins can be Washington-taxable. We track both ends of that chain.
Exchange access or CSV exports, wallet addresses for every chain, RSU sale history if you want the combined picture, prior returns that touched crypto, and your move date if you relocated. We scope the work on a free consultation call.
Count On Sheep is a USA-based team of crypto tax service specialists. Former Big 4 accountants and CPA leadership, now crypto-native blockchain tax experts. We do hands-on crypto tax work for high-volume investors, funds, founders, and active traders, including Washington residents from Seattle, Tacoma, Bellevue and beyond.
We don't file taxes. We don't replace your CPA. Most CPAs don't do crypto, that's the gap we fill. We bridge DeFi and TradFi to produce the 8949, Schedule D, and Schedule 1 inputs your CPA can drop into your return.
