Capital Gains Tax by State: Where Investors Keep the Most (2026)
Published April 3, 2026
Most states tax capital gains as ordinary income, but 8 states have no capital gains tax at all. A few states offer reduced rates or partial exclusions. Washington stands alone with no income tax but a 7% capital gains excise tax on gains above $250,000. Here is how all 50 states treat investment income.
All 50 States: Capital Gains Tax Treatment
| State | Treatment | Top Rate | Notes |
|---|---|---|---|
| Alaska | No Tax | 0% | No state income, sales, or estate tax. Residents receive Permanent Fund Dividend. |
| Florida | No Tax | 0% | No income tax, no estate tax. Major retirement destination. |
| Nevada | No Tax | 0% | No income tax. Revenue from gaming taxes and sales tax. |
| New Hampshire | No Tax | 0% | No income or sales tax. Interest/dividend tax repealed 2025. Very high property tax. |
| South Dakota | No Tax | 0% | No income tax. Low overall tax burden. Popular trust-friendly state. |
| Tennessee | No Tax | 0% | No income tax. Highest combined sales tax. Hall Tax on interest/dividends repealed 2021. |
| Texas | No Tax | 0% | No income tax. High property tax partly offsets. No corporate income tax (franchise tax instead). |
| Wyoming | No Tax | 0% | No income tax. Low overall tax burden. Revenue from mineral extraction. |
| Arizona | Reduced Rate | 2.5% | 2.5% flat tax. Social Security exempt. 25% capital gains exclusion. |
| Arkansas | Reduced Rate | 4.4% | High combined sales tax. 50% capital gains exclusion on certain assets. |
| Montana | Reduced Rate | 5.9% | No sales tax. Capital gains taxed at reduced rate (2% credit on first $1K). |
| New Mexico | Reduced Rate | 5.9% | Social Security fully exempt. 40% capital gains deduction. |
| South Carolina | Reduced Rate | 6.4% | Social Security fully exempt. $15K retirement income deduction. 44% capital gains exclusion. |
| Wisconsin | Reduced Rate | 7.6% | Social Security exempt. 30% capital gains exclusion on WI farm assets. High property tax. |
| Washington | Special Rules | 7% | No income tax but 7% capital gains tax on gains above $250K. High combined sales tax. B&O gross receipts tax for businesses. |
| North Dakota | Ordinary Income | 1.9% | 1.95% flat tax — lowest income tax rate of any state with an income tax. |
| Indiana | Ordinary Income | 3.0% | 3.05% flat tax — one of the lowest flat rates. |
| Pennsylvania | Ordinary Income | 3.1% | 3.07% flat tax. Exempts ALL retirement income (SS, pensions, 401k, IRA). Inheritance tax 4.5-15%. |
| Ohio | Ordinary Income | 3.5% | First $26,050 exempt. No tax on Social Security. $200 retirement income credit. |
| Kentucky | Ordinary Income | 4.0% | 4% flat tax. Inheritance tax on non-lineal heirs. $31,110 pension exclusion. |
| Louisiana | Ordinary Income | 4.3% | Highest combined sales tax with local. Exempts all retirement income. |
| Michigan | Ordinary Income | 4.3% | 4.25% flat tax. Some pension/retirement income exclusions for those born before 1946. |
| Colorado | Ordinary Income | 4.4% | 4.4% flat tax. Social Security exempt for most retirees. $20K–$24K retirement income exclusion for 55+. |
| North Carolina | Ordinary Income | 4.5% | 4.5% flat tax (dropping from 4.75%). Social Security exempt. $4K retirement income deduction. |
| Utah | Ordinary Income | 4.7% | 4.65% flat tax. Taxes Social Security (tax credit offsets for lower incomes). |
| Mississippi | Ordinary Income | 4.7% | Exempts all retirement income. First $10K of income tax-free. |
| Oklahoma | Ordinary Income | 4.8% | Top rate 4.75%. $10K retirement income exclusion. |
| Missouri | Ordinary Income | 4.8% | Social Security fully exempt. Public pension exclusion. |
| Illinois | Ordinary Income | 5.0% | 4.95% flat tax. Exempts all retirement income (SS, pensions, 401k). Very high property tax. |
| Alabama | Ordinary Income | 5.0% | Low property tax, high combined sales tax with local additions |
| West Virginia | Ordinary Income | 5.1% | Taxes Social Security (being phased out — full exemption by 2026). Moderate income tax. |
| Georgia | Ordinary Income | 5.5% | Moved to 5.49% flat tax. $65K retirement income exclusion for 62+. |
| Iowa | Ordinary Income | 5.7% | Inheritance tax being phased out (repealed by 2025). Social Security exempt. |
| Kansas | Ordinary Income | 5.7% | Social Security exempt for AGI under $75K. |
| Maryland | Ordinary Income | 5.8% | Only state with BOTH estate and inheritance tax. $39,500 pension exclusion for 65+. |
| Virginia | Ordinary Income | 5.8% | Top rate 5.75% above $17K. $12K age deduction for 65+. |
| Idaho | Ordinary Income | 5.8% | 5.8% flat tax. Social Security exempt. |
| Nebraska | Ordinary Income | 5.8% | Inheritance tax 1-18% depending on relationship. SS exempt as of 2025. |
| Rhode Island | Ordinary Income | 6.0% | Taxes Social Security for AGI above $101,000 (single). Estate tax with low exemption. |
| Delaware | Ordinary Income | 6.6% | No sales tax. $12,500 retirement income exclusion for 60+. Social Security exempt. |
| Connecticut | Ordinary Income | 7.0% | Estate tax with high exemption. Taxes Social Security for AGI above $75K (single) / $100K (joint). |
| Maine | Ordinary Income | 7.1% | Estate tax with $6.8M exemption. $35K pension exclusion. |
| Vermont | Ordinary Income | 8.8% | Taxes Social Security same as federal treatment. High income tax up to 8.75%. |
| Massachusetts | Ordinary Income | 9.0% | 5% flat tax + 4% millionaire surtax above $1M. Low estate tax exemption ($2M). |
| Minnesota | Ordinary Income | 9.8% | Taxes Social Security (partial subtraction for lower incomes). Estate tax with $3M exemption. |
| Oregon | Ordinary Income | 9.9% | No sales tax. High income tax (9.9% top rate). Lowest estate tax exemption ($1M). |
| New Jersey | Ordinary Income | 10.8% | Highest property tax in US. Inheritance tax (no estate tax as of 2018). $100K retirement exclusion for 62+. |
| New York | Ordinary Income | 10.9% | Second highest tax burden. $20K pension exclusion for 59.5+. NYC has additional city income tax (3.078-3.876%). |
| Hawaii | Ordinary Income | 11.0% | Lowest effective property tax. High income tax rates up to 11%. General excise tax instead of sales tax. |
| California | Ordinary Income | 12.3% | Highest top marginal rate (13.3% including mental health surcharge). Capital gains taxed as ordinary income. |
States With No Capital Gains Tax
8 states levy no tax on capital gains: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Wyoming. These are the states with no state income tax. For investors with large portfolios, relocating to one of these states before selling appreciated assets can save tens or hundreds of thousands of dollars.
For example, selling $1 million in long-term capital gains in California (13.3% top rate) versus Florida (0%) means a potential state tax difference of over $130,000. This is why many founders and investors establish residency in no-income-tax states before major liquidity events.
States With Reduced Capital Gains Rates
Several states offer partial exclusions or reduced rates on capital gains, making them more attractive for investors than their headline income tax rates suggest:
- Arizona: 2.5% flat tax. Social Security exempt. 25% capital gains exclusion.
- Arkansas: High combined sales tax. 50% capital gains exclusion on certain assets.
- Montana: No sales tax. Capital gains taxed at reduced rate (2% credit on first $1K).
- New Mexico: Social Security fully exempt. 40% capital gains deduction.
- South Carolina: Social Security fully exempt. $15K retirement income deduction. 44% capital gains exclusion.
- Wisconsin: Social Security exempt. 30% capital gains exclusion on WI farm assets. High property tax.
Washington's Unique Capital Gains Tax
Washington state is an outlier. It has no income tax, but in 2022 enacted a 7% excise tax on long-term capital gains exceeding $250,000. The tax was upheld by the Washington Supreme Court, which classified it as an excise tax rather than an income tax.
Key details of Washington's capital gains tax:
- Rate: 7% on gains above $250,000
- Exemptions: Real estate sales, retirement accounts, small business stock (qualified small business stock), and livestock/timber are exempt
- Filing threshold: Only applies to individuals with over $250K in annual long-term capital gains
- Effective rate: Because the first $250K is exempt, the effective rate on $500K in gains is 3.5%
This makes Washington less attractive than other no-income-tax states for high-net-worth investors, but still far cheaper than high-tax states like California, New York, or New Jersey for most scenarios.
The Highest State Capital Gains Tax Rates
For investors in states that tax capital gains as ordinary income, the highest rates apply in:
- California: 13.3% (including 1% mental health surcharge above $1M)
- Hawaii: 11%
- New Jersey: 10.75%
- Oregon: 9.9%
- Minnesota: 9.85%
- New York: 10.9% (plus NYC tax of up to 3.876% for city residents)
Combined with federal long-term capital gains tax (0%, 15%, or 20%) and the 3.8% Net Investment Income Tax, total capital gains taxation for high earners in California can exceed 37%.
Planning Around State Capital Gains Tax
Investors with flexibility on timing and location have several strategies:
- Establishing residency: Moving to a no-income-tax state before a large sale. Most states require 183+ days of physical presence to establish residency.
- Tax-loss harvesting: Offsetting gains with losses reduces both federal and state liability.
- Qualified Opportunity Zones: Deferring and potentially reducing capital gains by investing in designated opportunity zones.
- Installment sales: Spreading recognition of gains across multiple tax years to stay in lower brackets.
Use our capital gains tax calculator to model your specific scenario across states. For detailed state rankings, see the capital gains tax ranking page.
Frequently Asked Questions
Which states have no capital gains tax?
Nine states have no capital gains tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Wyoming. These are the same states with no income tax (except Washington, which has no income tax but does have a 7% capital gains tax on gains above $250K).
How are capital gains taxed at the state level?
Most states (about 33) tax capital gains as ordinary income — at the same rates as wages and salary. A few states offer reduced rates or partial exclusions. Nine states with no income tax have no capital gains tax at all. Washington is unique: no income tax, but a 7% excise tax on long-term capital gains exceeding $250,000.
What is the highest state capital gains tax rate?
California has the highest effective state capital gains tax rate at 13.3% (including the 1% mental health surcharge on income above $1M). Hawaii follows at 11%, and New Jersey at 10.75%. These rates apply to capital gains taxed as ordinary income.
About This Data
Capital gains treatment data compiled from state revenue department publications and Tax Foundation research. Tax laws change frequently — verify current rules with your state's revenue department. See our methodology.