Did you know that when it comes to capital gains tax, the state you reside in can make a significant difference in how much you owe?
Capital gains tax can have a substantial impact on your investment returns, but did you know that the tax rates can vary from state to state? Understanding which states have the highest capital gains tax rates is essential for savvy investors looking to maximize their profits. In this article, we’ll explore the topic of state capital gains tax and delve into which states impose the highest taxes. We’ll also discuss the implications for investors and provide valuable insights to help you navigate this aspect of taxation.
In the United States, capital gains tax is typically levied on the profits made from the sale of assets like stocks, bonds, and real estate. However, the tax rates and structures can differ significantly depending on where you live. Some states have higher tax rates, while others have no state-level capital gains tax at all. Knowing which states fall into each category can help you make informed decisions when it comes to your investments and potentially save you thousands of dollars in taxes.
Let’s dive into the states with the highest capital gains tax rates. We’ll explore the implications for investors and provide strategies to navigate these tax landscapes more effectively. Whether you’re a seasoned investor or just starting out, understanding the state capital gains tax landscape is crucial for optimizing your investment returns.
Share your thoughts on state capital gains tax rates in the comments below. Have you faced any challenges or found success in managing these taxes? We’d love to hear from you and learn about your experiences!
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How Federal & States Tax Capital Gains
Until an asset is sold, you will have unrealized capital gains and not yet owe taxes. Gains on an investment are First, we have a federal capital gains taxes to worry about. There is a Federal capital gains rate of
- 0%
- 15%
- 20%
- and these are based upon your current ordinary income tax bracket.
Short term capital gains vs Long term capital gains
There are two types of capital gains – short term and long-term gains. Short term capital gains taxes are applied to gains made from investments that are held for a year or less, while long-term capital gains income taxes are applied to gains on investments that are held for more than a year. (not from income from investments)
Short-term capital gains tax rates are typically higher than long-term capital gains income taxes. This is because short term investments are considered to be more speculative and less stable than long term investments. Long term capital gains taxes are typically lower than short term capital gains taxes.
A Complete Guide to Federal Capital Gains Tax
RSUs – File a Section 83b Election
Do States Tax Capital Gains? Do You Have To Pay State Taxes On Capital Gains?
Are capital gains taxed by state? In most cases, yes. State taxes on capital gains are calculated as a percentage of the total capital gains earned in a year. The exact percent of capital gains varies from state to state, but is typically between 5 and 7 percent tax.
So, if an investor earns $100,000 in capital gains in a year, they would owe approximately $5,000 to $7,000 in state taxes on those gains.
The amount of state taxes you will pay on your capital gains will depend on the state in which you reside. Each state has its own tax laws, so you will need to consult with a tax professional in your state to determine the exact amount you will owe.
Again, in general, you can expect to pay between 5 and 7 percent of your capital gains in state taxes. I will provide a detailed, state by state break down below.
State Taxes on Capital Gains
Some states also levy taxes on capital gains. Most states tax capital gains are based on the same tax rates they use for regular income taxes. So, if you’re lucky enough to live somewhere with no state income tax, you won’t have to worry about capital gains taxes at the state level.
New Hampshire doesn’t tax ordinary income, but does tax dividends from investments and taxes on investment income. The usual high-income tax suspects (California, New York, Oregon, Minnesota, New Jersey and Vermont) have high taxes on capital gains, too. A good capital gains calculator takes both federal and state taxation into account.
What States Have No Capital Gains Tax?
There are nine states with 0% capital gains tax:
- Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington State and Wyoming are the nine states that have no state capital gains tax
- AK, FL, NV, NH, SD, TN, TX, WA, and WY
What state do you pay capital gains tax in? All of the sates not named above, you pay capital gains tax in. Four states have a capital gains tax rate of over 9% (plus DC):
- Minnesota, Oregon, Washington DC, New Jersey, and California.
- MN, OR, NJ, and CA
Tax Preferential Treatment for Capital Gains by Some States
We know that for the federal taxes, the government taxes ordinary income at a greater tax rate than that generated by wealth via capital gains.
- Most states also give capital gains preferences tax treatment to money earned by investment and capital gain, rather than money earned by income. The breaks on capital gains may differ by state though.
- Some states exclude some or all of capital gains income from their taxable income, while others have a lower tax than the state income tax. Others will provide a credit equal to the capital gains.
- Some go further and will provide a tax break for in-state business investments. Iowa and Wisconsin go even further to incentive investments in the farming industry!
Capital Gains Taxes by State
- States tax capital gains in a variety of ways.
- Some states, like California, have a capital gains tax that is imposed on the sale of certain assets, like shares of stocks and bonds.
- Other states, like Colorado, have a capital gains tax that is imposed on the sale of all assets, regardless of what type of asset it is.
The way that states tax capital gains can have a big impact on how much money people owe in taxes when they sell an asset or investment for a profit.
For example, if someone sells a stock for a profit in California, they will have to pay a capital gains tax on that sale. However, if they sell the same stock in New Hampshire, they will not have to pay any capital gains tax to the state.
The amount of capital gains income tax that a person has to pay can also vary depending on how long they owned the asset before selling it.
For example, if someone owned a share of stock for 2 years and then sold it for a profit, they would have to pay a lower long-term capital gains tax rate than someone who owned the stock for 2 months (short-term capital gains) before selling it.
Do I owe capital gains tax on property sold out of state?
Chances are the property was a quality investment property or a second home, if it was out of state. If that is the case – there are different capital gains rules vs if it was your primary residence. Whether the property was out of state or not, has less of an impact.
See my recent article on capital gains real estate
Ex. Source: State Capital Gains Tax Rate By State 2022 (www.michaelryanmoney.com)
State Capital Gains Tax – Listed by State
States with no capital gains tax
Which happen to be the states without ordinary income or capital gains tax…
Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. These are the same states that do not tax personal income on wages
Lowest Capital Gains Tax States
Above are the states with no capital gains tax. After those states, the next lowest capital gains tax states are, in order:
- North Dakota (2.90%), Pennsylvania (3.07%), Indiana (3.23%), Louisiana (4.25%), Michigan (4.25%), Arizona (4.50%), Colorado (4.55%), Oklahoma (4.75%, Ohio (4.80%, Illinois (4.95%)
Highest Capital Gains Tax States
Above are the lowest capital gains tax states. Below are the highest capital gain tax states, in order:
- California (13.30%), New Jersey (10.75%), Washington DC (10.75%), Oregon (9.90%), Minnesota (9.85%), New York (8.82%), Vermont (8.75%), Iowa (8.53%)
State-Level Capital Gains Tax: Which States Have the Highest Taxes:
State Capital Gains Tax Calculator by State
CA California Capital Gain Tax – Capital Gains Tax in California State 2022
13.3%
How much is capital gains tax in California? California’s capital gain tax rate is 13.3%. The tax is imposed on the sale or exchange of capital assets, including shares of stock, bonds, and real estate. The tax is also imposed on the sale of certain business assets and on the gain from the sale of a partnership interest or limited liability company interest.
Capital Gains Tax Calculator California
For details on CA Capital Gains Tax, click here
FL Florida Taxes Capital Gains – Capital Gains Tax Florida 2022
0%
How Much is Capital Gains Tax in Florida? Florida capital gains tax is 0%. This means that any gains made on the sale of capital assets, such as stocks, bonds, or real estate, are not subject to state tax. This makes Florida an attractive destination for retirees and investors, as they can keep more of their money in their retirement accounts.
The lack of a state capital gains tax in FL does have some drawbacks, however. For one, it means that the state misses out on revenue that could be used to fund public services. Additionally, it can create an uneven playing field for businesses, as those that are headquartered in Florida enjoy a tax advantage over their out-of-state competitors.
Despite these drawbacks, the lack of a FL capital gains tax is a major selling point for Florida. It attracts retirees and investors, who can then spend their money in the state, boosting the economy. It also provides a competitive advantage for businesses based in Florida. In the end, many feel the positives outweigh the negatives, and the state capital gains tax in Florida is 0%.
Section 220.13, Florida Statutes; Rule 12C-1.013
WA Washington State Taxes Capital Gains – Capital Gains Washington State 2022
0%
What is capital gains tax in Washington State? Washington capital gains tax is 0%. Washington is one of nine states with a zero percent capital gains tax rate.
Related Reading: Is There a 7% Washington State Capital Gains Tax?
NY New York Taxes Capital Gains – What is The Capital Gains Rate In New York?
8.82%
How much is the capital gains tax in New York State? The capital gains tax in New York is 8.82%. This is higher than the national average of 7.65%. The capital gains tax New York is a bit higher than the average, but it’s still lower than what residents in some other states pay.
For example, California’s capital gains tax rate is 13.3%, while Maine’s is 7.15% but NY state capital gains tax is one of the highest in the country..
Texas Taxes Capital Gains 2022
0%
How much is capital gains tax in Texas? In 2022, the capital gains tax in Texas will be 0%. This means that if you sell an asset for more than you paid for it, you will not owe any capital gain tax in Texas. TX is one of nine states with 0% state capital gains tax.
Related Reading:
Oregon Taxes Capital Gains – Does Oregon Tax Capital Gains?
9.90%
How much is capital gains tax in Oregon? The Oregon state capital gains tax is 9.90%
NV Capital Gains Tax in Nevada – Does Nevada Have Capital Gains Tax?
0%
Is there a capital gains tax in Nevada? No, there is no state cap, the capital gains tax Nevada is 0%. When it comes to state capital gains taxes Nevada is currently one of the most favorable states for investors. There is no state capital gains tax in Nevada, which means that any profits made from the sale of investments or property are completely tax-free.
However, this could all change in the near future. The state legislature has been considering a proposal that would institute a capital gains tax in NV. Capital gains revenue would be a significant new revenue source for the state. It is estimated that it would generate over $200 million per year in new capital gains revenue. This money would be used to fund state programs and services, including education and infrastructure.
Here is a good article on the capital gains tax in NV for a home sale.
AL Alabama Taxes Capital Gains 2022 – Does Alabama Have a Capital Gains Tax?
5%
Is there a capital gains tax in Alabama? Yes there is. The Alabama capital gains tax rate is 5%
AK Capital Gains Tax Alaska – Does Alaska Have Capital Gains Tax?
0%
Is there a capital gains tax in Alaska? No there is not. The Alaska capital gains tax rate is 0%
Ex. Source: State Capital Gains Tax Rate By State 2022 (www.michaelryanmoney.com)
AZ Capital Gains Tax in Arizona – Does Arizona Have Capital Gains Tax 2022?
4.5%
Is there a capital gains tax in Arizona? Yes there is. The Arizona capital gains tax rate is 4.5%
AR Arkansas Capital Gains Tax – Capital Gains Tax Arkansas 2022?
5.5%
Is there a capital gains tax in Arkansas? Yes, there is. The Arkansas capital gains tax rate is 5.5%
CO Colorado Capital Gains Tax – Does Colorado Have Capital Gains Tax?
4.55%
Is there a capital gains tax in Colorado? Yes , there is. The Colorado capital gains tax rate is 4.55%
CT Connecticut Capital Gains Tax 2022 – Does Connecticut Have Capital Gains Tax?
6.99%
Is there a capital gains tax in Connecticut? Yes, there is. The Connecticut capital gains tax rate is 6.99%
DE Delaware Capital Gains Tax – Capital Gains Tax Delaware?
6.6%%
Is there a capital gains tax in Delaware? Yes, there is. The Delaware capital gains tax rate is 6.6%
GA Capital Gains Tax Georgia – Does Georgia Have Capital Gains Tax?
5.75%%
Is there a capital gains tax in Georgia? Yes, there is. The Georgia capital gains tax rate is 5.75%
HI Hawaii Taxes Capital Gains – Does Hawaii Have Capital Gains Tax?
7.25%
Is there a capital gains tax in Hawaii? Yes, there is. The Hawaii capital gains tax rate is 7.25%
Idaho Taxes Capital Gains
6.93%
The Idaho capital gains tax is a tax on the sale of assets, such as stocks, bonds, and real estate, that have appreciated in value. The tax is 6.93% of the gain, and is due when the asset is sold.
The Idaho capital gains tax is a relatively new tax, and was first imposed in the state of Idaho in 2011. The tax is currently scheduled to expire, unless it is renewed by the state legislature.
IL Illinois Taxes Capital Gains – IL Capital Gains Tax Rate?
4.95%
Is there a capital gains tax in Illinois? Yes, if you live in Chicago or any other part of Illinois. The Illinois capital gains tax rate is 4.95%
IN Indiana Taxes Capital Gains – Capital Gains Tax In Indiana?
3.23%
Is there a capital gains tax in Indiana? Yes, there is. The Indian capital gains tax is 3.23%
IA Iowa Taxes Capital Gains – How Much Is Capital Gains Tax in Iowa?
8.53%
How much is the capital gains tax in Iowa? The Iowa capital gains tax is 8.53%
KS Kansas Taxes Capital Gains – How Much is Capital Gains Tax in Kansas?
5.7%
How much is the capital gains tax in Kansas? The Kansas capital gains tax is 5.7%
KY Kentucky Taxes Capital Gains – How Much is Capital Gains Tax in Kentucky?
5%
How much is capital gains tax in Kentucky? The capital gains tax in Kentucky is 5%
LA Louisiana Taxes Capital Gains – How Much is Capital Gains Tax in Louisiana?
6%
How much is capital gains tax in Louisiana? The capital gains tax in Louisiana is 6%
MA Maine Taxes Capital Gains – What is The Capital Gains Tax in Maine?
7.15%
How much is the capital gains tax in Maine? The Maine capital gains tax is 7.15%. This includes the Maine capital gains tax on real estate. And for some reason, more than any other state – I get asked how to avoid capital gains tax in Maine more than any other it seems.
MD Maryland Taxes Capital Gains – Does Maryland Have Capital Gains Tax?
5.75%
Are capital gains taxed in Maryland? Yes, they are. The Maryland capital gains tax is 5.75%
MA Massachusetts Taxes Capital Gains – Capital Gains Tax in Massachusetts?
5%
Is there a capital gains tax in Massachusetts? Yes, there is. The Massachusetts capital gains tax is 5%
Michigan Taxes Capital Gains – What is Capital Gains Tax in Michigan?
4.25%
The state of Michigan capital gains tax rate is 4.25%.
The MI Michigan capital gains tax rate of 4.25% is relatively low compared to other states. For example, California has a top capital gains tax rate of 13.3%.
MN Minnesota Taxes Capital Gains – Does Minnesota Tax Capital Gains?
9.85 %
Is there a capital gains tax in Minnesota? Yes, there is. And it is one of the highest in the country. The Minnesota capital gains tax is 9.85%
MS Mississippi Taxes Capital Gains 2022 – How Much is Capital Gains Tax in Mississippi?
5%
Is there a capital gains tax in Mississippi? Yes, there is. The Mississippi capital gains tax rate is 5%
MO Missouri Taxes Capital Gains – What is Capital Gains Tax in Missouri?
5.4%
What is the capital gains tax in Missouri? The Missouri capital gains tax is 5.4%. And strangely enough, this is another state I frequently get asked – how to avoid capital gains tax in Missouri.
MT Montana Taxes Capital Gains – What is Capital Gains Tax in Montana?
6.9%
What is the capital gains tax in Montana? The Montana capital gains tax is 6.9%.
NE Nebraska Taxes Capital Gains – Does Nevada Have Capital Gains Tax?
6.84%
Is there a capital gains tax in Nebraska? Yes, there is. The Nebraska capital gains tax rate is 6.84%
NJ New Jersey Taxes Capital Gains – Does New Jersey Have Capital Gains Tax?
10.75%
Does New Jersey have a capital gains tax? Yes, and it is the second highest capital gains tax in the country. The New Jersey capital gains tax is 10.75%
NH New Hampshire Taxes Capital Gains – Is There a Capital Gains Tax in New Hampshire?
0%
Is there a capital gains tax in New Hampshire? No, new Hampshire capital gains tax is zero
NM New Mexico Taxes Capital Gains – Does New Mexico Have Capital Gains Tax?
5.9%
Is there a capital gains tax in New Mexico? Yes, there is. New Mexico capital gains tax is 5.9%
NC North Carolina Taxes Capital Gains – How Are Capital Gains Taxed in North Carolina?
4.99%
Is there a capital gains tax in North Carolina? Yes, there is. North Carolina Capital Gains Tax is 4.99%
ND North Dakota Taxes Capital Gains
2.9%
Is there a capital gains tax in North Dakota? Yes, but it is one of the lowest in the country. The North Dakota capital gains tax is 2.9%
OH Ohio Taxes Capital Gains – Does Ohio Tax Capital Gains?
4.8%
How much is capital gains tax in Ohio? The Ohio capital gains tax is 4.8%
OK Oklahoma Taxes Capital Gains – What is the Capital Gains Tax in Oklahoma?
4.75%
What is the capital gains tax in Oklahoma? The Oklahoma capital gains tax is 4.75%
PA Pennsylvania Taxes Capital Gains – Does Pennsylvania Tax Capital Gains?
3.07%
Does Pennsylvania tax capital gains? Yes, they do. The Pennsylvania capital gains tax is 3.07%
RI Rhode Island Taxes Capital Gains – What is the Capital Gains Tax in Rhode Island?
5.99%
What is the capital gains tax in Rhode Island? The capital gains tax Rhode Island is 5.99%
SC South Carolina Taxes Capital Gains – How Much is Capital Gains Tax in South Carolina?
7%
Is there a capital gains tax in South Carolina? Yes, there is. How much is the capital gains tax in South Carolina? The South Carolina capital gains tax is 7%
SD Capital Gains Taxes Capital Gains – Does North Dakota Have Capital Gains Tax?
0%
Does North Dakota have capital gains tax? No, ND is one of the states that have zero tax on capital gains. So, the capital gains tax in South Dakota is 0%
TN Tennessee Taxes Capital Gains – Does Tennessee Have a Capital Gains Tax?
0%
Does Tennessee have a capital gains tax? No, there is no capital gains tax in the state of Tennessee. This means that any profits made from the sale of investments or property are not subject to taxation.
Related Reading: Find Out Now: How Much is TN Capital Gains Tax?
UT State Capital Gains Tax Utah – Does Utah Have a Capital Gains Tax?
4.95%
As a Utah resident, you’ll need to pay capital gains tax on any profits you earn from selling assets such as stocks, bonds, and real estate. The rate on capital gains tax in Utah will depend on how long you’ve owned the asset (long-term capital asset vs short-term capital gains tax) , as well as your overall tax bracket.
The current state capital gains tax for Utah is 4.95%. The state provides a simple calculator for capital gains tax UT here
VT Vermont Taxes Capital Gains – How Much is Capital Gains Tax in Vermont?
8.75%
Is there a capital gains tax in Vermont? Yes there is. The Vermont capital gains tax is 8.75%
VA Capital Gains Tax in Nevada – Does Virginia Have Capital Gains Tax?
5.75%
How much is capital gains tax in Virginia? The capital gains tax in Virginia is 5.75%
Washington DC Taxes Capital Gains – Does Washington DC Have Capital Gains Tax?
8.75%
Is there a capital gains tax in Washington DC? Yes, there is. The Washington DC capital gains tax rate is 8.75%
WV West Virginia Taxes Capital Gains – West Virginia Long-Term Capital Gains Tax Rate
6.5%
Is there a capital gains tax in West Virginia? Yes, there is. The West Virginia capital gains tax rate is 6.5%
WI Wisconsin Taxes Capital Gains – How Much is Capital Gains Tax in Wisconsin?
7.65%
How are capital gains taxed in Wisconsin? As of 2022, the Wisconsin capital gains rate is 7.65%. Overall, the Wisconsin capital gains tax rate isa tad above average compared to other states.
WY Wyoming Taxes Capital Gains
0%
Is there a capital gains tax in Wyoming? No there isn’t. The Wyoming capital gains tax rate is 0%
Capital Gains Tax Calculator by State
State Capital Gains Tax: Capital Gain Tax Rates by State
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