To deduct your 2024 Washington State Capital Gains Excise Tax as a federal capital loss on your 2025 return, you must report it as a new "sale" of a worthless asset. Because you are a cash-basis taxpayer, you cannot adjust your 2024 sales proceeds for a tax you didn't pay until 2025. Since the tax is an "excise tax" and not an "income tax," it is generally not deductible under the standard State and Local Tax (SALT) deduction. Instead, the accepted workaround to obtain a federal tax benefit is to treat the tax payment as a reduction in the previous sale's proceeds—which, when paid in a later year, is reported as a separate capital loss.
- Go to Federal > Wages & Income > Stocks, Cryptocurrency, Mutual Funds, Bonds, Other.
- Create a new entry for "Other" or "Stocks."
- Enter "WA Capital Gains Excise Tax Paid for 2024 Sale".
- Date Sold= the actual date in 2025 when you paid the tax to Washington.
- Date Acquired= the same date as the Date Sold (or one day prior).
- Sale Proceeds= $0.
- Cost Basis= the total amount of WA Excise Tax paid.
This generates a capital loss for the exact amount of the tax you paid, which will then offset your other 2025 capital gains or up to $3,000 of ordinary income.
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