Did you know your state could take a bigger bite out of your investment profits than Uncle Sam? State capital gains taxes can significantly impact your bottom line, and the rules vary widely.

Many investors are unaware of the complexities of state capital gains taxes, leading to unexpected tax bills and missed opportunities for tax savings.

This guide provides a comprehensive overview of state capital gains taxes, including state-by-state information and strategies to minimize your tax liability.

But let’s answer your question right away. Which states have the highest capital gains rates? Which have the lowest? And most importantly, what is the state capital gains tax rate in YOUR state? Find out below with this handy tool I have created for you

State Capital Gains Tax Information

State-by-State Capital Gains Tax Overview

This section provides a clear, concise overview of how each state (and the District of Columbia) approaches capital gains taxation.

We’ll highlight states with no capital gains tax, those with the highest rates, and provide a quick reference guide for every state.

Find your state’s capital gains tax rate and rules. Compare rates across all 50 states + D.C. Use this handy tool below that I created to help you find the capital gains rate for each state. Updated for 2025.

Remember, tax laws are subject to change, so always consult your state’s tax authority or a qualified tax professional for the most up-to-date information.

(Note: This table is for informational purposes only and should not be considered tax advice. Always consult official sources.) Note: The table above is a simplified representation. For detailed rates and brackets, always refer to the latest state-specific tax information.

9 States with NO Capital Gains Tax

Imagine selling an investment for a substantial profit and keeping every penny of that gain. For residents of nine states, this is a reality. These states currently do not impose a tax on capital gains:

• Alaska: https://revenue.alaska.gov/
• Florida: https://floridarevenue.com/
• Nevada: https://tax.nv.gov/
• New Hampshire (Note: New Hampshire does tax interest and dividend income.): https://www.revenue.nh.gov/
• South Dakota: https://dor.sd.gov/
• Tennessee: https://www.tn.gov/revenue.html
• Texas: https://comptroller.texas.gov/
• Washington: https://dor.wa.gov/
• Wyoming: https://revenue.wyo.gov/

These states often do not have a broad-based state income tax, making them attractive to investors seeking to maximize their after-tax returns. Residents enjoy the benefit of keeping a larger portion of their net investment income and profits.
You can find more about this at The Entrust Group.

5 States with the HIGHEST Capital Gains State Tax Rates

On the other end of the spectrum, some states take a much larger share of your investment profits.
Several states tax capital gains at rates that can significantly impact your bottom line.

And it’s not just about the rate; it’s also about how they calculate the tax.

State Capital Gains Tax Calculator

Hard Truth –> “You might not like this but…”

You might not like this, but these states currently have the highest top marginal capital gains tax rates:

• California (Up to 14.4% (including a 1.1% payroll tax that applies to high-income wage earners). California treats all capital gains as ordinary income.)
• New Jersey (Up to 10.75%. New Jersey also taxes capital gains as ordinary income.)
• New York (Up to 10.9%. New York, similarly, treats capital gains as ordinary income.)
• Minnesota (Up to 9.85%)
• Oregon (Up to 9.9%)

The key takeaway here is that these states generally do not distinguish between short-term and long-term capital gains. All profits are added to your other income and taxed at your regular state income tax rate.

The Price of Paradise (or Not): High-tax states often argue they’re investing in infrastructure and social programs.

Why Do Some States Have Higher Capital Gains Taxes Than Others?

• States’ Rights, Tax Fights: 
  Some states love low taxes to attract residents and businesses. The con? They might have to cut services or find other revenue sources.
• No-Tax Nirvana vs. High-Tax Reality: Living in a no-capital-gains-tax state is like winning the investor lottery. But those states might lack the robust public services found in high-tax states. The why? Different philosophies on government funding.”
• The Price of Paradise (or Not): High-tax states often argue they’re investing in infrastructure and social programs (pro for residents who value those services). The con? Investors might flee to lower-tax states.
• Tax Freedom vs. Funding Needs: States with no capital gains tax offer maximum freedom for investors. Why? They believe this boosts their economy. The con? Potentially lower funding for public goods.
• The Great State Tax Gamble: States are in competition. Why states will forgo income, is they believe in the long term it is better. The pro is that it attracts people and business. The con is that services may need to be cut.
• Capital Gain Rates by State

Understanding Federal vs. State Capital Gains Taxes: Key Differences Explained

You’ve likely heard of capital gains tax, but did you know that where you live can dramatically affect how much you owe? While the federal government, specifically the Internal Revenue Service (IRS), sets baseline capital gains tax rates, most states also levy their own taxes on investment profits.

This section breaks down the essential differences between federal and state capital gains taxes.

What are Capital Gains? A Simple Explanation

Ever sold something for more than you paid for it? That’s the basic idea behind capital gains.

Capital gains are the profits you make when you sell an asset for more than you bought it for.

Capital gains are, quite simply, the profits you realize when you sell an asset for a higher price than its “basis” (generally, the original purchase price plus any improvements). This applies to a wide range of assets, not just stocks and bonds.

Relatable Scenario –> Real-Life Example

Let’s say you bought a vintage guitar for $1,000 a few years ago. You cleaned it up, replaced a few parts (costing $100), and now you’ve sold it for $2,500. Your basis is 

1,100 (1,000 + $100), and your capital gain is 1,400 (2,500 - $1,100). 
This same principle applies to stocks, bonds, real estate, cryptocurrency, and even collectibles like artwork or rare coins.

There are two main types of capital gains:

Short-Term vs. Long-Term Capital Gains: The Federal View

The IRS makes a crucial distinction between how long you’ve owned an asset before selling it. This distinction determines whether your gain is considered “short-term” or “long-term,” and it significantly impacts your federal tax bill.

Key Points:

• Short-Term Capital Gains Tax: Assets held for one year or less. Taxed as ordinary income.
• Long-Term Capital Gains: Assets held for more than one year.
  For 2025, federal long-term capital gains tax rates are typically 0%, 15%, or 20%, depending on your overall taxable income and filing status. You can find a detailed breakdown of these 2025 capital gains tax brackets at Kiplinger.
• Expert Insight: Check out the IRS guidelines on capital gains tax for the nitty-gritty details.

State Capital Gains Taxes: Beyond the Federal Rules

You’ve figured out your federal capital gains tax, but you’re not done yet. Feel free and press play below to get a quick slideshow overview of state capital gains taxes.

While the federal government sets its own capital gains tax rates. Most states also impose a tax on capital gains, and these rules can vary dramatically from state to state. And that’s why you’re here, right?

This means your overall tax liability on investment profits depends heavily on your state of residence.

In some cases, your state’s tax bite might be even bigger than the federal government’s. Unlike the federal system, which has consistent rules across the country, state capital gains tax laws are a patchwork.

Some states follow the federal distinction between short-term and long-term gains, while others tax all capital gains as ordinary income.

Common Mistakes and Misconceptions About State Capital Gains Taxes

Don’t make these costly capital gains tax mistakes! Learn how to avoid common errors and maximize your investment returns.

You should be aware of the following to minimize your capital gains:

Related Reading

• How To Avoid Paying Capital Gains Tax On Stocks – 15 Ways
• How To Avoid Capital Gains Tax on Home Sale and more…
• What is Capital Gains Yield and Why is it Important? Here’s Everything You Need to Know
• Selling Your House? How To Avoid Capital Gains Tax on a Home Sale for details.

Conclusion

Federal and state capital gains taxes can be complex, but understanding the rules is essential for making smart investment decisions.

Remember, state capital gains taxes vary widely, so it’s crucial to know your specific state’s laws.

By employing strategies like holding assets long-term, utilizing tax-advantaged accounts, considering tax-loss harvesting from capital losses, and being aware of common mistakes, you can potentially save a significant amount of money.

For personalized advice, consult with a qualified tax professional or financial advisor. They can help you develop a tax-efficient investment strategy tailored to your specific situation. Don’t let unexpected state capital gains taxes derail your investment goals. With a little planning, you can keep more of your hard-earned profits.

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Note: The content provided in this article is for informational purposes only and should not be considered as financial or legal advice. Consult with a professional advisor or accountant for personalized guidance.

• Sharing the article with your friends on social media – and like and follow us there as well.
• Sign up for the FREE personal finance newsletter, and never miss anything again.
• Take a look around the site for other articles that you may enjoy.

Note: The content provided in this article is for informational purposes only and should not be considered as financial or legal advice. Consult with a professional advisor or accountant for personalized guidance.