A Washington seller recently completed a sale and paid REET based on a flat 1.28% rate applied to the full sale price of $900,000. A real estate attorney later informs the seller that the REET was incorrectly calculated. What is the most likely reason the calculation was wrong, and what would the correct approach have been?
Correct Answer
D) The seller applied a single flat rate to the entire price instead of using Washington's graduated tier structure, which requires 1.1% on the first $525,000 and 1.28% on the remaining $375,000
Washington's REET under RCW 82.45 is a graduated tax, meaning different rates apply to different portions of the sale price. For a $900,000 sale, the correct calculation is: 1.1% on the first $525,000 = $5,775; and 1.28% on the remaining $375,000 ($900,000 − $525,000) = $4,800; Total = $10,575. The seller incorrectly applied a flat 1.28% to the entire $900,000 ($11,520), overpaying by $945. The error was treating Washington's graduated REET as if it were a flat-rate tax — a common and specifically tested mistake.
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Related Topics & Key Terms
Key Terms:
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Many states have laws to limit how much property taxes can increase each year, regardless of market value fluctuations.
Various programs and exemptions exist to reduce the property tax burden for specific groups, such as seniors, homesteaders, or veterans.
A transfer tax is a tax imposed on the transfer of ownership of real estate.
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