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State Capital Gains Tax Rates

Need to figure out your capital gains rate? It’s worth noting that while many states do levy state-level capital gains taxes, they don’t all follow the federal system. Moreover, the approach varies from one state to another.

This means that depending on where you reside, you might have a different set of calculations to perform. So, when considering your capital gains rate, it’s essential to factor in both federal and state-level taxes. Additionally, researching your specific state’s methodology will ensure that you get an accurate understanding of what you owe. Always consider consulting a tax professional if you find the process overwhelming or need clarity on the specifics for your state.

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

Understanding Capital Gains Basics

Capital gains are broadly categorized into two: short-term and long-term. When you hold onto an asset for less than a year before selling it, it’s deemed short-term and often gets taxed akin to regular income.

On the flip side, assets sold after holding for a longer duration fall under the long-term capital gains tax umbrella. Federal tax rates for these are 0%, 15%, or 20%, influenced by one’s filing status and taxable income. Additionally, states have their own tax stipulations for capital gains, each with its unique approach.

States Without Capital Gains Taxes

For those with substantial assets, relocating to the following states might be financially advantageous: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. In these locales, only the Federal Capital Gains are applicable, typically proving to be less than the standard income tax rate.

Nine States with Favorable Capital Gains Rates

Beyond the states with zero capital gains taxes, there’s a cluster of states that levy a rate somewhere between zero and the regular income rate. These include Arizona, Arkansas, Hawaii, Montana, New Mexico, North Dakota, South Carolina, Vermont, and Wisconsin. They manage to offer reduced rates either by:

  1. Permitting taxpayers to exclude certain portions or the entirety of their gains from taxable income.
  2. Imposing a tax rate that’s lower than the typical income rate.

State-Specific Benefits for Local Businesses

A few states, like Colorado, Idaho, Louisiana, and Oklahoma, offer appealing capital gains breaks for investments made in local businesses. Meanwhile, Wisconsin and Iowa extend such benefits to niche sectors, such as agriculture.

States with Steeper Capital Gains Taxes

Contrastingly, some states have notably high capital gains taxes. Leading this pack is California with a rate of 13.30%. This is notably more than the next two contenders, New Jersey and Washington D.C., both of which stand at 10.75%.

Additional Notes on Capital Gain Rates

  • The information provided does not factor in taxes from depreciation recapture.
  • States like AK, FL, NV, NH, SD, TN, TX, and WY don’t levy a state capital gains tax.
  • States including AL, AR, DE, HI, IN, IA, KY, MD, MO, MT, NJ, NM, NY, ND, OR, OH, PA, SC, and WI either let individuals deduct federal taxes from state taxable income, charge local income taxes, or have unique tax treatment for capital gains income.
  • For incomes surpassing $1 million, California adds an extra 1% tax, leading to a peak rate of 13.3%.
  • In Massachusetts, short-term capital gains are charged at a 12% rate, with an added 4% tax for incomes over $1 million.
  • Should revenue targets be reached by April 1st, Louisiana might decrease its tax rates.
  • This content is meant solely for educational and general knowledge. While we trust our sources to be dependable, we cannot guarantee complete accuracy. It shouldn’t serve as the main foundation for investment decisions.
  • 1031 Exchange Place does not provide legal or tax recommendations. Seek advice from a qualified expert for your personal situation.