Starting July 1, 2025, Washington State is rolling out major changes to its estate tax rules — including a higher exemption and a new break for homeowners.
If you own a home and your estate is near the current threshold, these updates could mean significant tax savings for your loved ones down the road.
Let’s walk through two real-life inspired examples to show how these changes can affect families — and why it’s worth reviewing your estate plan now.
💡 First, What’s Changing?
Under the current law (through June 30, 2025):
The estate tax exemption is $2.193 million
Your entire estate is counted, including your share of the value of your primary residence
Starting July 1, 2025, Washington will:
Increase the exemption to $3 million
Exclude up to $1 million of your primary residence’s value from the estate tax calculation if:
You are married or in a registered domestic partnership at time of death and
The residence passes to the surviving spouse and
Both spouses occupied the property for at least 6 months during the year before death (exceptions apply for long‑term care)
After excluding the decedent’s share of the residence, the remaining estate must be below the filing threshold (currently $2.193 million)
- Excluding the residence brings your estate under the exemption amount. If your estate is determined to be over the exemption amount even after excluding the value of the residence, then the full share of the value of your home will be included in your estate.
This is a game-changer for families who are hovering just above the current threshold — especially those who’ve owned their homes a long time and seen their values climb.
✅ Couple #1: Mark and Lisa
Mark and Lisa are in their late 70s. Mark has $1.1 million in savings and investments. Lisa has $1.8 million in savings and investments. In addition to these assets, they have $1.5 million in joint investments and savings and own a $950k home together.
🧮 Under current law:
Mark's estate:
$1.1 million in assets in his name
+$1,225,000 share of their joint assets (half of $1.5M investments and $950k home)
$2,325,000 estate This is $132,000 over the current $2,193,000 exemption, and his estimated estate tax would be $13,200 ($132,000 x 10% tax rate).
.
Lisa’s estate:
$1.8 million in assets in her name
$1.225 million share of joint assets (see math above).
$3,025,000 This estate is $832,000 over the exemption, and her estimated estate tax is $83,200 ($832,000 x 10% tax rate).
.
✅ Under the new law:
Mark's estate:
$2,325,000 (assets in his name + half of joint assets)
-$475,000 (50% of their home)
$1,850,000 which is under $3 million and will not be subject to state estate tax.
.
Lisa's estate:
$3,025,000 (assets in her name + half of joint assets)
-$475,000 (50% of their home)
$2,550,000 which is under $3 million and will not be subject to state estate tax.
💬 Bottom line: Mark and Lisa go from owing tens of thousands in estate tax to owing nothing at the death of the first spouse— thanks to the higher exemption and the home exclusion. Note that the surviving spouse will lose the primary residence exemption, and will likely incur an estate tax unless they significantly spend down their assets.
⚠️ Couple #2: David and Michelle
David and Michelle are married and have the following assets: David has $1.3 million in investments and savings, while Michelle has $2.4 million. They also have $1.5 million in joint investments and own a $950,000 million home.
✅ Under the new law:
David's estate:
$1,300,000 assets in his name
+$1,225,000 (half of joint assets)
-$475,000 (50% of their home)
$2,050,000 (under $3 million and will not be subject to state estate tax.
.
Michelle's estate:
$2,4000,000 assets in her name
+$1,225,000 (half of joint assets)
-$475,000* (50% of their home)
$3,150,000 *Because Michelle's state is over $3 million even after excluding their residence, she is not eligible for the exclusion, and her share of the house will be included in her estate.
+$475,000* (value of house that will actually be included)
$3,625,000 This estate is $625,000 over the new $3,000,000 exemption, and the estimated estate tax will be $62,500 ($625,000 x 10% tax rate).
💬 Bottom line: The new law brings David's estate under the exemption amount, but not Michelle's. However, under the old law, her estate would have been $1,432,000 over the exemption, and her estimated tax would have been $164,800. Despite still owing tax, her estate tax under the new law is still $102,300 less than it would have been under the old law.
🔑 Key Takeaways
Before July 1, 2025: The estate tax exemption is $2.193M and your entire estate is counted — including your home.
Starting July 1, 2025: The exemption increases to $3 million, and up to $1 million of your primary residence’s value is excluded.
- If your estate is over the exemption amount even after excluding the value of your primary residence, you will lose the primary residence exclusion.
🧭 Should You Make Changes?
If your estate — including your home — is approaching or above the $3 million mark, this is the perfect time to:
Review your beneficiary designations
Evaluate how your assets are titled
Consider whether gifting or trust planning could help
A quick estate review now could help your heirs avoid a complicated — and expensive — process later. Please see estate tax rate guide below, specific to Washington state.
***Important note: this is not tax or legal advice. Please consult tax professionals and estate planning professionals in your estate planning.