B&O, Excise & Business Taxes for Washington Landlords

Washington's headline tax advantage — no state income tax on rental income — gets all the attention. But "no income tax" doesn't mean a Washington landlord owes the state nothing. The state funds itself through a different set of taxes, and a few of them quietly reach rental owners depending on how you rent and when you sell. The two that surprise people most are the Business & Occupation (B&O) tax and the real estate excise tax (REET). Here's a plain-English guide to the Washington business and transaction taxes every Vancouver, WA owner should understand — and the long-term-rental exemptions that keep most landlords in the clear.

As always, this is general information, not tax advice. Tax classifications turn on the specifics of your activity, so confirm your situation with the Washington Department of Revenue or a CPA.

The Washington B&O Tax — and Why Most Landlords Don't Pay It

The Business & Occupation tax is Washington's signature business tax. It's a gross-receipts tax, meaning it's charged on your total income, not your profit — a crucial difference, because it applies even in a year you lose money. That makes it the tax new landlords worry about most.

The relief: income from long-term residential rentals — leases of 30 days or more — is generally exempt from the B&O tax under Department of Revenue rules. Renting out a standard single-family home, duplex, or apartment on a typical lease usually owes no B&O tax at all. The rationale is that long-term residential renting is treated differently from operating an active service business. For the great majority of Vancouver, WA owners holding traditional rentals, B&O simply isn't a concern.

Where B&O Does Apply: Short-Term & Transient Rentals

The exemption is about length of stay. Rent for stays of fewer than 30 days — vacation rentals, Airbnb-style listings, transient lodging — and the income can fall under taxable B&O classifications. Worse, short-term lodging typically triggers a stack of other taxes that long-term leases never see:

• Retail sales tax on the rental charge.
• Local lodging / transient occupancy taxes imposed by the city or county.
• B&O tax on the gross receipts under the applicable classification.

This is one of the under-appreciated costs of running a short-term rental versus a long-term lease, and it belongs in any honest comparison of the two models. We weigh the broader trade-offs in short-term rental vs. long-term rental and cover the middle path in our guide to mid-term rentals in Vancouver, WA — where 30+ day stays can keep you on the right side of the exemption.

Real Estate Excise Tax (REET): The Tax You Pay When You Sell

You won't owe state income tax on your rentals, but selling one is a taxable event. Washington's real estate excise tax applies to the sale of real property and is paid by the seller. Unlike a flat transfer tax, Washington uses a graduated state rate tied to the sale price:

• 1.10% on the portion of the price up to $525,000
• 1.28% on the portion from $525,000.01 to $1,525,000
• 2.75% on the portion from $1,525,000.01 to $3,025,000
• 3.00% on the portion above $3,025,000

On top of the state rate, a local REET — typically 0.25% to 0.50% depending on the jurisdiction — is added. The tax is bracketed, so a higher-priced sale is taxed in pieces, not all at the top rate. For example, on a $600,000 Clark County rental, the state REET is roughly $6,735 — the first $525,000 at 1.1% ($5,775) plus the next $75,000 at 1.28% ($960) — before adding the local portion.

REET is separate from any federal capital gains tax or depreciation recapture you may owe on the same sale. We pull the whole sale-time tax picture together in capital gains tax when you sell a rental in Washington, and cover the tool that defers the federal piece in how to do a 1031 exchange in Washington.

Personal Property Tax on Furnished & Short-Term Rentals

Everyone knows real estate is taxed as real property — see our Vancouver, WA property tax guide for how that bill works. Less well known is Washington's personal property tax, which applies to business-owned tangible personal property. For most unfurnished long-term rentals, this doesn't come into play. But if you operate a furnished or short-term rental, the furniture, appliances, and equipment you provide can be taxable personal property, requiring an annual listing with the county assessor. It's rarely a large bill, but furnished-rental operators should know the obligation exists rather than be surprised by it.

Business Licensing & Rental Registration

Tax exemption and licensing are two different questions. Even though long-term residential rent is generally B&O-exempt, some Washington cities require a business license, rental business registration, or rental housing inspection regardless of your tax status. Requirements vary by jurisdiction across Clark County, so check both the Department of Revenue and your specific city. We cover the local landscape in rental licensing requirements for Washington landlords.

For the typical long-term Vancouver landlord, Washington's business taxes are mostly a non-event — until you sell, or until you shorten your leases below 30 days. Both decisions change your tax exposure, so make them with eyes open.

Putting It Together: What a Typical Washington Landlord Actually Owes

Strip away the jargon and the picture is reassuring for most owners:

• No state income tax on rental earnings — ever.
• No B&O tax on standard long-term residential leases.
• Annual property tax to the county (deductible on your federal return).
• REET only when you sell, paid by you as the seller.
• B&O, sales, and lodging taxes only if you run short-term rentals.

The tax that catches owners off guard is almost always one of two events: selling (REET) or going short-term (B&O plus lodging taxes). Plan around those two and the rest takes care of itself. For the full federal strategy that pairs with this, see our rental property tax tips for Washington landlords.

Frequently Asked Questions

Do Washington landlords pay B&O tax on rental income?

Income from long-term residential rentals (leases of 30 days or more) is generally exempt from the Washington B&O tax. Short-term and transient rentals under 30 days can be taxable under B&O classifications and may also owe retail sales tax and local lodging taxes.

What is the real estate excise tax (REET) in Washington?

REET is a tax on the sale of real estate, paid by the seller. The graduated state rate is 1.1% up to $525,000, 1.28% from $525,000 to $1.525M, 2.75% from $1.525M to $3.025M, and 3% above that — plus a local REET that typically adds 0.25% to 0.50%.

Do landlords pay personal property tax in Washington?

Real estate is taxed as real property, but business-owned personal property in a rental — furnishings and appliances in a furnished or short-term rental — can be subject to personal property tax, with an annual listing to the county assessor. Most unfurnished long-term rentals aren't affected.

Does a long-term landlord need a Washington business license?

It depends on your activity and city. Long-term residential rent is generally B&O-exempt, but some cities require a business license or rental registration regardless. Check both the Department of Revenue and your local city requirements.

Sources: Washington DOR — Real Estate Excise Tax and the Washington Department of Revenue B&O guidance. REET rates effective through December 31, 2026. Verified June 2026.

This article provides general information only and does not constitute tax advice. Consult a qualified tax professional for guidance specific to your situation. For questions about managing your Vancouver, WA rental, contact VPMG at (360) 803-2002.

Written by Avenir Gedarevich, Washington State Designated Broker (License #25011405) at VPMG Property Management in Vancouver, WA.