State Capital Gains Tax Rates on Real Estate

Need to understand state capital gains tax rates before selling investment real estate? While federal tax rules matter, state tax treatment can also affect your net proceeds. This page compares capital gains tax by state, highlights states without capital gains tax on investment real estate, and explains the special rules that can change the effective tax rate in certain states. Use the list below to compare capital gains tax rates by state for the direct sale of investment real estate.

-- Click or touch a state name for more information. --

How State Capital Gains Tax Rates Apply to Real Estate

States Without Capital Gains Tax on Investment Real Estate

For direct sales of investment real estate, the following states on this page generally do not impose a state-level tax on the gain: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Federal capital gains tax and depreciation recapture may still apply. Washington belongs in this group for real-estate purposes because its state capital gains tax does not apply to the sale or exchange of real estate, and New Hampshire’s Interest and Dividends Tax was repealed for taxable periods beginning after December 31, 2024.

How States Commonly Tax Real Estate Gains

Outside the no-tax states, most jurisdictions take one of three approaches. They may tax the gain at the state’s regular individual income tax rate, allow a deduction or exclusion that reduces the effective rate, or apply surtaxes or local income taxes that can increase the overall burden. That is why the state pages are more useful than a broad ranking list. The details behind the rate often matter just as much as the number itself.

Some states also look different once you focus specifically on real estate. For example, Hawaii does not have a separate capital gains tax rate, so it is more accurate to describe Hawaii as taxing gains through its normal income tax system rather than through a special reduced capital gains regime. Washington is the opposite kind of exception for this page because it has a state capital gains tax on certain assets, but not on the direct sale or exchange of real estate.

States with Higher Top State Rates

Some states can materially reduce net sale proceeds because they tax capital gains under their regular income tax system or layer on surtaxes. On your current chart, California is listed at 13.30%, Massachusetts at 12.50%, and New Jersey and Washington, DC at 10.75%. The number shown on this page should be read as the highest state-level rate that may apply in that jurisdiction, with the supporting notes and state pages providing the important qualifiers behind that figure.

Important Capital Gains Tax Notes for Real Estate Investors

The information provided does not factor in taxes from depreciation recapture.
States like AK, FL, NV, NH, SD, TN, TX, WA, and WY generally do not impose a state-level tax on direct capital gains from the sale of investment real estate. New Hampshire’s Interest and Dividends Tax was repealed for taxable periods beginning after December 31, 2024, and Washington’s capital gains tax does not apply to the sale or exchange of real estate.
States including AL, AR, DE, HI, IN, IA, KY, MD, MO, MT, NJ, NM, NY, ND, OR, OH, PA, SC, and WI may have deductions, local income taxes, or other unique rules that affect how capital gains from investment real estate are taxed, so those details should be reviewed in the additional state information for each page. Ohio, for example, has school district income taxes, and South Carolina allows a 44% deduction for recognized net capital gains held more than one year.
California taxes capital gains as ordinary income, and taxpayers with taxable income over $1,000,000 may owe an additional 1% state tax, bringing the top rate to 13.3%.
In Massachusetts, short-term capital gains are taxed at 8.5%, and an additional 4% surtax may apply above the annually adjusted threshold.
Louisiana now imposes a flat 3% individual income tax for taxable periods beginning on or after January 1, 2025, and its prior net capital gains deduction was repealed for most sales occurring on or after that date.
This content is for general educational purposes only and should not be relied on as legal or tax advice. 1031 Exchange Place does not provide legal or tax advice. Please consult a qualified tax professional regarding your specific situation.

FAQs on Capital Gains Tax Rates

What is a state capital gains tax on investment real estate?

A state capital gains tax on investment real estate is the state-level tax treatment that may apply when you sell investment property for a gain. Some states tax the gain through their regular individual income tax system, some offer deductions or other adjustments, and some do not impose a state-level tax on the gain at all.

Which states do not impose a state-level tax on direct capital gains from investment real estate?

On this page, the states that generally do not impose a state-level tax on direct capital gains from the sale of investment real estate are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Federal capital gains tax and depreciation recapture may still apply.

Are state capital gains tax rates separate from federal capital gains tax?

Yes. State capital gains tax rules are separate from federal tax rules. For federal tax purposes, gains are generally long-term if the asset was held for more than one year and short-term if held for one year or less, and net short-term capital gains are generally taxed as ordinary income.

Does depreciation recapture affect the tax result when selling investment real estate?

Yes. Depreciation recapture can change the tax result because part of the gain may be treated as ordinary income under federal tax rules. That is why simple state capital gains rate charts do not tell the whole story for every real estate sale.

Why can the effective state tax on real estate be different from the listed state rate?

The listed state rate is a starting point, but the effective tax result may change because of deductions, exclusions, surtaxes, local income taxes, or the way a state classifies capital gains. That is why the additional state information matters just as much as the headline rate.