Capital Gains Tax Rates by State 2026
Compare state capital gains tax rates across all 50 states plus DC. See which states charge zero tax, which hit you the hardest, and how your state can add tens of thousands to your bill.
Complete State Capital Gains Tax Rate Table
Search, sort, and compare. Green = 0% tax, Yellow = under 4%, Red = 4% and above.
| State | Tax Rate |
|---|---|
| Alabama (AL) | 5.00% |
| Alaska (AK) | 0% |
| Arizona (AZ) | 2.50% |
| Arkansas (AR) | 4.40% |
| California (CA) | 13.30% |
| Colorado (CO) | 4.40% |
| Connecticut (CT) | 6.99% |
| Delaware (DE) | 6.60% |
| Florida (FL) | 0% |
| Georgia (GA) | 5.49% |
| Hawaii (HI) | 8.25% |
| Idaho (ID) | 5.80% |
| Illinois (IL) | 4.95% |
| Indiana (IN) | 3.05% |
| Iowa (IA) | 5.70% |
| Kansas (KS) | 5.70% |
| Kentucky (KY) | 4.00% |
| Louisiana (LA) | 4.25% |
| Maine (ME) | 7.15% |
| Maryland (MD) | 5.75% |
| Massachusetts (MA) | 5.00% |
| Michigan (MI) | 4.25% |
| Minnesota (MN) | 9.85% |
| Mississippi (MS) | 5.00% |
| Missouri (MO) | 4.80% |
| Montana (MT) | 5.90% |
| Nebraska (NE) | 5.84% |
| Nevada (NV) | 0% |
| New Hampshire (NH) | 0% |
| New Jersey (NJ) | 10.75% |
| New Mexico (NM) | 5.90% |
| New York (NY) | 8.82% |
| North Carolina (NC) | 4.50% |
| North Dakota (ND) | 2.50% |
| Ohio (OH) | 3.50% |
| Oklahoma (OK) | 4.75% |
| Oregon (OR) | 9.90% |
| Pennsylvania (PA) | 3.07% |
| Rhode Island (RI) | 5.99% |
| South Carolina (SC) | 6.40% |
| South Dakota (SD) | 0% |
| Tennessee (TN) | 0% |
| Texas (TX) | 0% |
| Utah (UT) | 4.65% |
| Vermont (VT) | 8.75% |
| Virginia (VA) | 5.75% |
| Washington (WA) | 7.00% |
| Washington D.C. (DC) | 8.25% |
| West Virginia (WV) | 5.50% |
| Wisconsin (WI) | 7.65% |
| Wyoming (WY) | 0% |
Showing 51 of 51 states/jurisdictions. State tax rates are approximate and may vary based on specific circumstances.
The 9 States with Zero Capital Gains Tax
Where your investment gains escape state tax entirely — and why it matters so much.
Alaska
0% Tax
Florida
0% Tax
Nevada
0% Tax
New Hampshire
0% Tax
South Dakota
0% Tax
Tennessee
0% Tax
Texas
0% Tax
Wyoming
0% Tax
Zero State Tax on Investment Gains
Nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming — do not levy a state-level capital gains tax on their residents. For investors with substantial gains, the difference between living in one of these states versus a high-tax state can be staggering. A $500,000 long-term capital gain that triggers $66,500 in California state tax costs exactly zero in Florida or Texas. That is not a rounding error — it is the difference between keeping your money and handing it to the state treasury. The savings compound over a lifetime of investing, making these states especially attractive for high-net-worth individuals and anyone planning a major liquidity event.
The Compounding Advantage Over Time
The absence of state income tax does not just save you money once — it provides an automatic boost to after-tax returns that compounds year after year. An investor who saves $30,000 annually in state taxes and earns even a modest 7% return on those savings would accumulate an additional $300,000+ over a decade. Over 20 years, the gap grows to nearly $1.3 million. This compounding effect is why many financial planners recommend that retirees and high-income earners seriously consider these states, especially during the years when they are drawing down investment portfolios or selling businesses.
The Washington State Catch
Washington gets listed as a no-income-tax state, and for most taxpayers it functions that way. But since 2023, Washington has imposed a 7% capital gains tax on long-term gains exceeding $270,000. If your long-term gains stay below that threshold, you pay zero. But if you sell a business or a large stock position that pushes past $270,000, the state takes 7% of the excess. Short-term gains are still exempt. The law survived a Washington Supreme Court challenge, so it is settled law for now — but it is something to factor in if you are planning a major sale.
Look at the Full Tax Picture, Not Just Income Tax
Zero income tax does not mean zero taxes. These states still need to fund government, and they do it through other channels. Texas has some of the highest property taxes in the country — often 2% or more of assessed value, which can cost more than an income tax would on a modest salary. Tennessee relies on a high sales tax. Florida has expensive homeowner insurance, especially on the coast. New Hampshire has no income or sales tax but leans heavily on property taxes. Before you pack your bags for a zero-tax state, run the numbers on property tax, sales tax, insurance, and overall cost of living. The best state for your wallet is the one where the total tax burden — not just income tax — is lowest for your specific situation.
States with the Highest Capital Gains Tax
Where your investment gains get hit the hardest — and by how much.
| Rank | State | Tax Rate |
|---|---|---|
| #1 | California | 13.30% |
| #2 | New Jersey | 10.75% |
| #3 | Oregon | 9.90% |
| #4 | Minnesota | 9.85% |
| #5 | New York | 8.82% |
| #6 | Vermont | 8.75% |
| #7 | Hawaii | 8.25% |
| #8 | Washington D.C. | 8.25% |
California: 13.3% — The Nation's Highest
California does not just lead the pack — it laps it. At 13.3%, the state capital gains rate is nearly three percentage points higher than the second-place finisher. California taxes capital gains as ordinary income with no preferential rate for long-term holdings, so even a patient investor who held a stock for a decade gets no break at the state level. Stack the 20% federal long-term rate and the 3.8% NIIT on top, and a California resident in the top bracket faces a combined rate north of 37% on long-term gains. On a $1,000,000 gain, that is roughly $371,000 in total taxes — $133,000 of which goes to Sacramento alone.
For short-term gains, the picture gets even uglier: the top federal rate of 37% plus 3.8% NIIT plus 13.3% California tax pushes the combined rate above 54%. That means more than half your short-term gain disappears to taxes.
New York: State + City Tax Can Hit 12.7%
New York State taxes capital gains at 8.82%, but if you live in New York City, add another 3.876% city tax on top. That combined 12.7% state-and-local rate makes NYC one of the most expensive places in America to realize investment gains. A $500,000 long-term gain in Manhattan generates roughly $63,500 in state and city taxes alone — on top of roughly $119,000 in federal tax and NIIT. New York also has aggressive residency auditing. The state employs a team of auditors specifically tasked with challenging former residents who claim they moved to Florida or Connecticut, and they look at everything from phone records to gym memberships to prove you never really left.
Oregon (9.9%) and Minnesota (9.85%)
Oregon and Minnesota round out the top tier at 9.9% and 9.85% respectively. Oregon notably has no state sales tax, which somewhat offsets the high income tax, but capital gains still take a heavy hit. Minnesota taxes capital gains as ordinary income with no preferential treatment. For residents of these states, the combined federal-plus-state rate on long-term gains exceeds 33% for top-bracket taxpayers, and the rate on short-term gains can approach or exceed 47%. Neither state offers any special exclusion or reduced rate for long-term holdings.
The $66,500 Gap: California vs. Florida
On a $500,000 long-term capital gain, the state tax difference between California (13.3%) and Florida (0%) is $66,500. That is not a small number — it is enough to fund a year of college, a decent rental property down payment, or a meaningful addition to a retirement portfolio. Over multiple years of investing and realizing gains, this gap grows into hundreds of thousands of dollars. This stark disparity is why relocation planning has become a major topic for high-income individuals, retirees, and business owners contemplating a sale.
How State Tax Changes Your Total Capital Gains Bill
Same gain, same federal tax, wildly different outcomes depending on where you live.
Three-State Comparison: $200,000 Long-Term Gain
Let us look at a single filer with $100,000 in other taxable income who realizes a $200,000 long-term capital gain in 2026. The federal tax on this gain runs approximately $30,000 at the 15% long-term rate. If total income pushes past the NIIT threshold, add roughly $3,800 in NIIT, bringing federal taxes to about $33,800. That part is identical across all three states. Where you live determines the rest.
Florida (0% state tax): Total ~$33,800
With zero state tax, your total bill stays at the federal amount of approximately $33,800. Your effective combined rate is about 16.9%, and you keep roughly $166,200 of your $200,000 gain. This is the best-case scenario for a U.S. taxpayer. Florida does not tax wages, dividends, or capital gains, making it the most popular relocation destination for investors fleeing high-tax states. The absence of a state tax bite also means your money compounds faster over time because you are not losing a chunk to Sacramento or Albany every year.
Pennsylvania (3.07% state tax): Total ~$39,940
Pennsylvania's flat 3.07% rate adds about $6,140 in state tax, bringing the total to roughly $39,940 for an effective combined rate near 20%. That is one of the lowest state rates in the country for a state that does impose income tax. Most investors find this manageable — it stings, but it does not reshape your financial plan the way a double-digit state rate would. If you live in Pennsylvania and are weighing a move, the savings from relocating to a zero-tax state would be modest compared to the cost and disruption of moving.
California (13.3% state tax): Total ~$60,400
California adds about $26,600 in state tax, pushing your total to roughly $60,400 for an effective combined rate of 30.2%. You keep only about $139,600 of your $200,000 gain — that is $26,600 less than the same investor in Florida, and the California state tax alone exceeds the entire federal long-term capital gains tax. For short-term gains the math gets even more painful: the combined rate can push past 50%, meaning you hand over more than half your gain to federal and state governments combined. This is why California residency planning and out-of-state restructuring have become such active areas of tax strategy.
Combined Rate Comparison: Federal + State + NIIT
| State | State Rate | Federal + NIIT | Combined Top Rate |
|---|---|---|---|
| Florida / Texas / WY | 0% | 23.8% | 23.8% |
| Pennsylvania | 3.07% | 23.8% | 26.87% |
| New York (state only) | 8.82% | 23.8% | 32.62% |
| New York City | 12.7% | 23.8% | 36.5% |
| California | 13.3% | 23.8% | 37.1% |
States with Preferential Capital Gains Treatment
A few states offer their own version of a long-term capital gains break — here is where they differ from the pack.
Arkansas
Arkansas applies a reduced tax rate to long-term capital gains compared to ordinary income. While the state's top ordinary income rate sits at 4.4%, long-term capital gains benefit from a lower rate that can save investors a meaningful amount on larger transactions. This makes Arkansas one of the few states that mirrors the federal government's approach of rewarding long-term holding periods with preferential tax treatment. If you are an Arkansas resident selling a long-held asset, the state gives you a genuine break — not all states do.
Montana
Montana allows a partial exclusion of net long-term capital gains from state taxable income, effectively reducing the rate on those gains. The exclusion amount and specifics can vary, so it is worth checking the current year's rules, but the principle is clear: Montana recognizes that long-term investment gains deserve different treatment than ordinary wages. For Montana residents with significant long-term gains, this exclusion can meaningfully reduce the state tax burden compared to states that treat all income equally.
North Dakota
North Dakota has a relatively low flat income tax rate, which means capital gains get taxed at a moderate level without the progressive brackets that push rates higher in other states. While it does not offer a specific preferential rate for long-term gains, the low overall rate makes it one of the more tax-friendly states for investors who still want access to state services and infrastructure. North Dakota also taxes capital gains as ordinary income, but the low flat rate keeps the total bill modest.
Colorado
Colorado allows a small capital gains subtraction for certain qualifying investments held long-term. The exclusion is not as generous as a zero-tax state or even Arkansas, but it does provide some relief on the state tax side. Colorado's flat income tax rate also keeps things simple — there is no progressive bracket structure that amplifies the tax hit on larger gains. For Colorado residents, the combination of a flat rate and a modest exclusion can take the edge off capital gains taxes compared to states like California or New York.
The SALT Deduction Cap and Why It Makes State Tax More Painful
The $10,000 SALT cap means most of your state capital gains tax is paid with after-federal-tax dollars.
What the SALT Cap Means for You
Before 2018, you could deduct the full amount of state and local taxes on your federal return, which effectively subsidized high-tax states. The Tax Cuts and Jobs Act capped that deduction at $10,000 — a number that barely covers property tax alone in many states, let alone state income tax on a six-figure capital gain. For a California resident paying $66,500 in state tax on a $500,000 gain, only $10,000 of that is deductible. The remaining $56,500 provides zero federal tax benefit.
This makes the real cost of state capital gains tax higher than the stated rate. You are paying the state tax with money that has already been taxed at the federal level on the portion above the $10,000 cap. For high earners in California, New York, and other high-tax states, the SALT cap is effectively a double tax — and it is one of the biggest reasons relocation planning has surged in popularity since 2018.
Should You Move to a No-Tax State Before Selling?
The savings can be enormous — but so can the audit risk if you do it wrong.
The Financial Case Is Clear
The math is not complicated. If you are sitting on a $2,000,000 long-term gain, the California state tax alone would run roughly $266,000. In Florida, it is zero. That $266,000 difference is enough to buy a nice house, fund years of retirement, or reinvest for compound growth. For business owners selling a company, the stakes are even higher — a $10,000,000 gain means $1.33 million in California state tax that vanishes in a no-tax state. The financial incentive to move is real and substantial.
Establishing Genuine Residency: The 183-Day Rule
Getting a mailing address in Nevada does not make you a Nevada resident. States determine residency based on where your domicile is — the place you consider your permanent home. The most common benchmark is the 183-day rule: you should spend more than half the year physically present in the new state. But days alone are not enough. Auditors also look at where your spouse and children live, where you vote, where your cars are registered, where your bank accounts are held, where you attend religious services, and even which gym you belong to.
California and New York are the most aggressive auditors. California's Franchise Tax Board has a dedicated unit that investigates former residents, and New York's Department of Taxation and Finance examines phone records, credit card statements, and E-ZPass toll data to prove you never really left. The safest approach is to move well before the sale — ideally a year or more — and sever as many ties with your old state as possible.
Audit Red Flags That Trigger State Investigations
Moving to a no-tax state one month before a multi-million-dollar sale is the biggest red flag you can wave. State auditors are not stupid, and they have seen every variation of the last-minute move. Other red flags include keeping your old home and renting it back, maintaining professional licenses in your former state, keeping your country club membership, having your children enrolled in schools in the old state, or filing a part-year resident return that shows you left just before a major gain.
The penalties for getting caught include back taxes, interest, and penalties that can exceed 40% of the tax owed. In extreme cases, states have pursued criminal charges for tax evasion. This is not a game of chance — it is a legal process that requires careful planning, thorough documentation, and professional guidance.
Beyond Taxes: Quality of Life Matters Too
The cheapest state from a tax perspective is not automatically the best place to live. Factor in proximity to family and friends, climate preferences, healthcare access, cultural amenities, career opportunities, and school quality for your children. Moving from San Francisco to rural Wyoming might save you $200,000 in state taxes, but if you hate the winters, miss your social network, and cannot find the healthcare you need, those savings come at a steep personal cost. The best decision is one that works for both your wallet and your well-being. Consult a tax professional and a financial advisor who can model the total impact and help you make a sound choice.
Multi-State Capital Gains: What If You Moved Mid-Year?
Selling after a mid-year move creates part-year filing obligations in two states.
Part-Year Resident Rules
When you move from one state to another during the tax year, you become a part-year resident of both states. Each state taxes the income you earned while you were a resident. If you sell a stock in March while living in California and then move to Nevada in June, California taxes the gain from the March sale. But if you move to Nevada in January and sell the stock in November, only Nevada gets to tax it — and Nevada charges zero. Timing your move relative to your sale is one of the most impactful planning decisions you can make.
Out-of-State Real Estate Sales
If you sell real estate in a state where you do not live, that state may assert the right to tax the gain. This creates a potential double-tax situation: both your home state and the property state want a piece. Most states offer a credit for taxes paid to another state, which prevents true double taxation, but the credit may not cover the full amount if the other state's rate is higher. If you are selling a rental property in a different state, talk to a tax professional who understands the reciprocal agreements and credit mechanisms between the two states involved.
Common State Capital Gains Tax Mistakes
These errors catch investors off guard every year. Learn from other people's expensive lessons.
Forgetting to File a Part-Year Return
If you moved mid-year, you must file part-year returns in both states. Skipping the old state's return triggers penalties and interest, even if you think you owe nothing.
Assuming All States Follow Federal Rules
States have their own definitions, exclusions, and rates. Do not assume your state handles capital gains the same way the IRS does. Check local rules before filing.
Ignoring the SALT Cap
The $10,000 SALT deduction cap means most of your state tax provides no federal benefit. Failing to account for this understates your true effective rate.
Sloppy Relocation Before a Big Sale
Moving one month before selling raises massive red flags. California and New York auditors will challenge the move, and penalties can exceed 40% of the tax owed.
Overlooking City and Local Taxes
NYC adds 3.876% on top of New York State tax. Some cities in Ohio and Pennsylvania have their own income taxes. These local add-ons can push your rate significantly higher.
Not Checking for State-Level Exclusions
States like Montana and Arkansas offer partial exclusions for long-term gains. Missing these means overpaying. Always check for state-specific capital gains breaks.