Brent Sullivan at Tax Alpha Insider flagged a counterintuitive wrinkle: in Washington a long term capital loss can be worth more than a short term loss, because the state's capital gains tax applies only to long term gains. The tax is 7 percent above an indexed standard deduction, with an additional 2.9 percent on gains above $1 million beginning in 2025, and only individuals pay it, though gains of grantor trusts and incomplete gift trusts are attributed to the settlor.
Loss harvesting asks how to offset a gain. The bigger question for a client with concentrated stock, founder shares or a coming liquidity event is whether the client should be the person recognizing the gain at all. A completed gift South Dakota nongrantor trust funded before the sale, a charitable remainder unitrust, a South Dakota community property trust for basis planning, and other state tax sensitive structures each answer that question differently. None is a last minute fix. The answer is not to harvest more losses but to build a better structure.
The full piece is at turnipseed.law.
