Capital Gains Tax by State 2026: All 50 States Compared

When you sell stocks, real estate, or other assets at a profit, you owe federal capital gains tax — and in most states, state capital gains tax on top. While the federal rate is 0%, 15%, or 20% depending on your income, state rates vary dramatically: from 0% in nine states to 13.3% in California.

This guide covers capital gains tax rates for all 50 states in 2026, which states offer preferential rates for long-term gains, and key planning strategies for investors.

States with No Capital Gains Tax

Nine US states have no state income tax — and therefore no state capital gains tax on most gains:

• Florida — No income tax; no CGT; no estate tax
• Texas — No income tax; no state CGT (note: local property taxes are high)
• Nevada — No income tax; no state CGT; popular for high-earner relocation
• Wyoming — No income tax; no state CGT; increasingly popular for trust and LLC formation
• South Dakota — No income tax; no state CGT; strong asset protection trust laws
• Alaska — No income tax; no CGT; no state sales tax
• Washington State — No general income tax BUT has a 7% capital gains tax on long-term gains above $250,000 (see below)
• Tennessee — No wage income tax; capital gains from investment income not taxed at state level
• New Hampshire — No income tax of any kind (the Interest and Dividends tax was fully eliminated January 1, 2025)

For investors with large capital gains events (real estate sales, stock option exercises, business sales), relocating to Florida, Texas, or Nevada before the sale can save tens of thousands in state tax. California aggressively pursues departing residents — establishing genuine domicile in a new state before a liquidity event requires careful planning.

States with Highest Capital Gains Tax Rates

These states tax capital gains as ordinary income at the same rates as wages:

For a California resident earning $500,000+ selling $1M in appreciated stock: federal CGT ~$200,000 (20%) + California ~$133,000 (13.3%) + Net Investment Income Tax $38,000 (3.8%) = approximately $371,000 in total tax on the $1M gain.

States with Preferential CGT Rates

A handful of states offer lower rates on long-term capital gains versus ordinary income:

• Massachusetts: Long-term gains (assets held 12+ months) taxed at 5%; short-term gains at 8.5% (note: both are on top of federal)
• Montana: Deduction of 2% on net capital gains; effective preferential treatment
• Arizona: 2.5% flat income tax (2023+) including capital gains — among the most competitive in the country
• Colorado: 4.40% flat rate on all income including gains
• Utah: 4.5% flat rate on all income including gains

States with flat income taxes (like Arizona's 2.5%, Colorado's 4.40%, Idaho's 5.3%) tax capital gains at those flat rates — which may be lower than the graduated rates in high-tax states.

Washington State's Capital Gains Tax

Washington State introduced a 7% capital gains tax (effective January 1, 2022) on long-term capital gains above $250,000 per year. This was upheld by the Washington Supreme Court in 2023. Key details:

• Rate: 7% flat on long-term gains above $250,000
• Threshold: First $250,000 is exempt — so sellers of appreciated assets need gains above this before Washington CGT applies
• Exemptions: Real estate (primary and investment); retirement accounts; qualified family business interests; forestry; commercial fishing
• Purpose: Washington has no general income tax but has long-running inequality debate; tech sector wealth (Amazon, Microsoft, Boeing) generates significant capital gains that previously escaped all state tax
• Impact: Primarily affects tech executives and investors with large stock option exercises, ESPP sales, or business sales with gains above $250,000/year