2026 Brings a New Luxury Motor Vehicle Tax for Vehicles over $100,000

Starting January 1, 2026, the state of Washington will impose an additional 8% tax on the selling price of a motor vehicle that exceeds $100,000. This is in addition to the existing general sales tax. This luxury tax also applies to the fair market value of a leased vehicle over $100,000. While it may initially seem to target exotic sports cars and luxury sedans or SUVs, it also applies to motor homes. There will be an additional 0.5% tax on watercraft and, beginning April 1, a 10% tax on most non-commercial aircraft sales. However, the 8% tax on motor vehicles exceeding $100,000 is likely to have the most significant impact on Valley RV Supercenter customers who purchase motorhomes.  

Exemptions from this tax include: 

Commercial vehicles, such as school buses and vehicles transporting 16 or more individuals 

Vehicles with a gross weight over 10,000 pounds, excluding motor homes 

Farm tractors and vehicles, unless used for cannabis production 

Off-road vehicles (not road licensable) 

Non-highway vehicles 

Snowmobiles

The tax applies to the amount of the selling price of the vehicle over $100,000. Therefore, a vehicle sold for $110,000; the 8% tax would apply to $10,000 and thus would be $800. The trade-in vehicle is also considered. If $90,000 was paid for a vehicle after trading in a $30,000 vehicle, the tax would apply to $20,000 and be $1,600. The tax applies to leased vehicles as well; the amount taxed being the fair market value of the vehicle at the beginning of the lease minus the current deduction amount of $100,000.

As another example, say you purchase an RV at $150,000. If you wait to make this purchase until the tax goes into effect, you will end up spending an extra $4,000 in taxes. Additionally, in King County, sales tax will increase from 10.5% to 10.7% at the start of the year. This will tack on an additional 0.2%, which would add $300.

Sellers, like the Valley RV Supercenter, will report the selling price before trade-in or the fair market value for leased vehicles on their combined excise tax return under the Sales/Lease of Luxury Vehicles category. They will then take the Exempt Portion of Selling Price deduction for each vehicle sold. If the luxury motor vehicle tax was not paid at the time of purchase, such as in private sales, the tax is due on the purchase price when the vehicle is registered with the Department of Licensing. The tax also applies to individuals who bring in an applicable vehicle from out of state, and the tax is likewise being paid when the vehicle is licensed in Washington. 

Ongoing, the tax will take inflation into account, with the exempt portion of the selling price (the $100,000) increasing by 2% on July 1 each year. So, a year from now, the tax will apply to the selling price of over $102,000, $104,040 the following year, and so on. 

The Department of Revenue has further details. If you have any questions about the new tax and its application to motor homes, please inquire with one of our Valley RV Superstore sales professionals.