How Much Will You Really Owe in Capital Gains When You Sell Your Rental in WA or ID?
How Much Will Uncle Sam and the State Take?
If you’re a landlord in Washington or Idaho getting ready to sell, one of the biggest questions is: “How much will I owe in capital gains?”
The answer can be complicated — and it can mean tens of thousands in taxes if you’re not prepared. Let’s break down what retiring landlords need to know before putting their rentals on the market.
What Are Capital Gains on Rental Properties?
Capital gains are the profit you make when selling a property for more than you paid (plus improvements).
For rentals, you’ll also deal with depreciation recapture, which adds another layer of tax liability.
👉 Learn more strategies in our Landlord Exit Toolkit: WA/ID Edition.
Capital Gains Rules in Washington & Idaho
Washington State
Washington doesn’t have a state income tax, but since 2022 it has a capital gains excise tax on certain assets over $250,000 in gains.
Real estate itself is exempt, but if you sell ownership interests in an LLC that holds property, you could be subject to this tax.
Always confirm with a CPA how your rentals are held before selling.
Idaho
Idaho taxes capital gains as part of regular state income tax.
Current top rate is about 5.8%.
Federal capital gains taxes still apply on top of Idaho’s state tax.
Federal Capital Gains Taxes
Short-term (owned under 1 year): Taxed as ordinary income.
Long-term (owned over 1 year): 0%, 15%, or 20% depending on your income bracket.
Depreciation Recapture: Taxed at up to 25%. This often surprises landlords who’ve taken years of write-offs.
Ways Retiring Landlords Can Reduce Capital Gains
1. 1031 Exchange
Roll your proceeds into another property to defer taxes.
Great for upgrading into a more passive investment.
Not ideal if you want to exit landlording entirely.
2. Seller Financing
Spreads out your gains over several years, potentially keeping you in a lower tax bracket.
3. Installment Sales or Creative Finance
Subject-to deals, wraps, or lease options can structure income over time and reduce the upfront tax hit.
4. Offset Gains With Losses
Work with a CPA to apply other capital losses against your rental sale.
👉 See our guide on Creative Financing Options for Retiring Landlords
Why Planning Ahead Matters
Many landlords wait until after the sale to think about taxes — and by then, it’s too late. By planning ahead, you can:
Save thousands (or tens of thousands) in taxes.
Choose an exit strategy that works for your retirement goals.
Transition smoothly without IRS or state headaches.
Ready to Explore Capital Gains Options?
At Easy Landlord Exit, we help landlords retire smoothly with creative finance solutions, tax-friendly exits, and investor-ready strategies.
👉 Download the free Landlord Exit Toolkit for checklists, financing strategies, and legal resources designed for Washington & Idaho landlords.