Rental income/property tax

AN ACT Relating to rental income received by people eligible for 1
certain property tax exemption programs; amending RCW 84.36.383; and 2
creating new sections. 3
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:4
Sec. 1. RCW 84.36.383 and 2024 c 119 s 1 are each amended to 5
read as follows: 6
As used in RCW 84.36.381 through 84.36.389, unless the context 7
clearly requires otherwise: 8
(1) "Accessory dwelling unit" means a separate, autonomous 9
residential dwelling unit that provides complete independent living 10
facilities for one or more persons and includes permanent provisions 11
for living, sleeping, eating, cooking, and sanitation.12
(2) "Combined disposable income" means the disposable income of 13
the person claiming the exemption, plus the disposable income of his 14
or her spouse or domestic partner, and the disposable income of each 15
cotenant occupying the residence for the assessment year, less 16
amounts paid or, for purposes of (n) of this subsection (2), received 17
by the person claiming the exemption or his or her spouse or domestic 18
partner during the assessment year for: 19
H-0226.1
HOUSE BILL 1040
State of Washington 69th Legislature 2025 Regular Session
By Representatives Doglio, Parshley, Ryu, Ramel, Klicker, Richards,
Reed, Alvarado, Shavers, Peterson, Paul, Wylie, Fey, Kloba, Lekanoff,
Fosse, and Reeves
Prefiled 12/11/24. Read first time 01/13/25. Referred to Committee
on Finance.
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(a) Drugs supplied by prescription of a medical practitioner 1
authorized by the laws of this state or another jurisdiction to issue 2
prescriptions; 3
(b) The treatment or care of either person received in the home 4
or in a nursing home, assisted living facility, or adult family home;5
(c) Health care insurance premiums for medicare under Title XVIII 6
of the social security act; 7
(d) Costs related to medicare supplemental policies as defined in 8
Title 42 U.S.C. Sec. 1395ss; 9
(e) Durable medical equipment, mobility enhancing equipment, 10
medically prescribed oxygen, and prosthetic devices as defined in RCW 11
82.08.0283; 12
(f) Long-term care insurance as defined in RCW 48.84.020;13
(g) Cost-sharing amounts as defined in RCW 48.43.005;14
(h) Nebulizers as defined in RCW 82.08.803; 15
(i) Medicines of mineral, animal, and botanical origin 16
prescribed, administered, dispensed, or used in the treatment of an 17
individual by a person licensed under chapter 18.36A RCW;18
(j) Ostomic items as defined in RCW 82.08.804;19
(k) Insulin for human use; 20
(l) Kidney dialysis devices; ((and))21
(m) Disposable devices used to deliver drugs for human use as 22
defined in RCW 82.08.935; and23
(n) Rental amounts up to $6,000 per year received from the 24
renting of living space in the person's principal place of residence.25
(i) For the purposes of this subsection (2)(n), "rental amount" 26
has the same meaning as in RCW 59.18.030.27
(ii) For the purposes of this subsection (2)(n), amounts received 28
from short-term rentals, as defined in RCW 64.37.010, are not 29
included. Any amounts received from a short-term rental must be 30
reported as income. 31
(3) "Cotenant" means a person who resides with the person 32
claiming the exemption and who has an ownership interest in the 33
residence. 34
(4) "County median household income" means the median household 35
income estimates for the state of Washington by county of the legal 36
address of the principal place of residence, as published by the 37
office of financial management. 38
(5) "Department" means the state department of revenue.39
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(6) "Disability" has the same meaning as provided in 42 U.S.C. 1
Sec. 423 (d)(1)(A) as amended prior to January 1, 2005, or such 2
subsequent date as the department may provide by rule consistent with 3
the purpose of this section. 4
(7) "Disposable income" means adjusted gross income as defined in 5
the federal internal revenue code, as amended prior to January 1, 6
1989, or such subsequent date as the director may provide by rule 7
consistent with the purpose of this section, plus all of the 8
following items to the extent they are not included in or have been 9
deducted from adjusted gross income: 10
(a) Capital gains, other than gain excluded from income under 11
section 121 of the federal internal revenue code to the extent it is 12
reinvested in a new principal residence; 13
(b) Amounts deducted for loss; 14
(c) Amounts deducted for depreciation; 15
(d) Pension and annuity receipts; 16
(e) Military pay and benefits other than attendant-care and 17
medical-aid payments; 18
(f) Veterans benefits, other than: 19
(i) Attendant-care payments; 20
(ii) Medical-aid payments; 21
(iii) Disability compensation, as defined in Title 38, part 3, 22
section 3.4 of the Code of Federal Regulations, as of January 1, 23
2008; and 24
(iv) Dependency and indemnity compensation, as defined in Title 25
38, part 3, section 3.5 of the Code of Federal Regulations, as of 26
January 1, 2008; 27
(g) Federal social security act and railroad retirement benefits;28
(h) Dividend receipts; and 29
(i) Interest received on state and municipal bonds.30
(8) "Income threshold 1" means: 31
(a) For taxes levied for collection in calendar years prior to 32
2020, a combined disposable income equal to $30,000;33
(b) For taxes levied for collection in calendar years 2020 34
through 2023, a combined disposable income equal to the greater of 35
"income threshold 1" for the previous year or 45 percent of the 36
county median household income; and 37
(c) For taxes levied for collection in calendar year 2024 and 38
thereafter, a combined disposable income equal to the greater of 39
"income threshold 1" for the previous year or 50 percent of the 40
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county median household income, adjusted every three years beginning 1
August 1, 2023, as provided in RCW 84.36.385(8). 2
(9) "Income threshold 2" means: 3
(a) For taxes levied for collection in calendar years prior to 4
2020, a combined disposable income equal to $35,000;5
(b) For taxes levied for collection in calendar years 2020 6
through 2023, a combined disposable income equal to the greater of 7
"income threshold 2" for the previous year or 55 percent of the 8
county median household income; and 9
(c) For taxes levied for collection in calendar year 2024 and 10
thereafter, a combined disposable income equal to the greater of 11
"income threshold 2" for the previous year or 60 percent of the 12
county median household income, adjusted every three years beginning 13
August 1, 2023, as provided in RCW 84.36.385(8). 14
(10) "Income threshold 3" means: 15
(a) For taxes levied for collection in calendar years prior to 16
2020, a combined disposable income equal to $40,000;17
(b) For taxes levied for collection in calendar years 2020 18
through 2023, a combined disposable income equal to the greater of 19
"income threshold 3" for the previous year or 65 percent of the 20
county median household income; and 21
(c) For taxes levied for collection in calendar year 2024 and 22
thereafter, a combined disposable income equal to the greater of 23
"income threshold 3" for the previous year or 70 percent of the 24
county median household income, adjusted every three years beginning 25
August 1, 2023, as provided in RCW 84.36.385(8). 26
(11) "Principal place of residence" means a residence occupied 27
for more than six months each calendar year by a person claiming an 28
exemption under RCW 84.36.381. 29
(12) The term "real property" also includes a mobile home which 30
has substantially lost its identity as a mobile unit by virtue of its 31
being fixed in location upon land owned or leased by the owner of the 32
mobile home and placed on a foundation (posts or blocks) with fixed 33
pipe, connections with sewer, water, or other utilities. A mobile 34
home located on land leased by the owner of the mobile home is 35
subject, for tax billing, payment, and collection purposes, only to 36
the personal property provisions of chapter 84.56 RCW and RCW 37
84.60.040. 38
(13) The term "residence" means a single-family dwelling unit 39
whether such unit be separate or part of a multiunit dwelling, may 40
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include one accessory dwelling unit and includes the land on which 1
such dwellings stand not to exceed one acre, except that a residence 2
includes any additional property up to a total of five acres that 3
comprises the residential parcel if this larger parcel size is 4
required under land use regulations. The term also includes a share 5
ownership in a cooperative housing association, corporation, or 6
partnership if the person claiming exemption can establish that his 7
or her share represents the specific unit or portion of such 8
structure in which he or she resides. The term also includes a 9
single-family dwelling situated upon lands the fee of which is vested 10
in the United States or any instrumentality thereof including an 11
Indian tribe or in the state of Washington, and notwithstanding the 12
provisions of RCW 84.04.080 and 84.04.090, such a residence is deemed 13
real property. 14
NEW SECTION. Sec. 2. This act applies to taxes levied for 15
collection in 2027 and thereafter.16
NEW SECTION. Sec. 3. RCW 82.32.805 and 82.32.808 do not apply 17
to this act. The legislature intends for this tax preference and its 18
expansion to be permanent.19
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