Capital Gains Tax by State: Complete 2025 Guide for All 50 States

When you sell investments for a profit, you owe capital gains tax at both the federal and state level. While federal rates are the same everywhere (0%, 15%, or 20% for long-term gains), state rates vary dramatically — from 0% to 13.3%. Knowing your state's rate is essential for investment planning, retirement decisions, and even choosing where to live.

States With No Capital Gains Tax

Eight states impose no tax on capital gains, making them the most tax-friendly locations for investors. These states have no individual income tax (or in New Hampshire's case, no tax on earned income or capital gains): Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Wyoming. Residents of these states pay only federal capital gains tax.

Highest Capital Gains Tax States

These ten states have the highest top marginal rates on capital gains (taxed as ordinary income unless noted):

1. California: 13.3%
2. New York: 10.9%
3. District of Columbia: 10.75%
4. New Jersey: 10.75%
5. Oregon: 9.9%
6. Minnesota: 9.85%
7. Massachusetts: 9% (flat rate)
8. Vermont: 8.75% (with deductions available)
9. Wisconsin: 7.65% (with deductions available)
10. Hawaii: 7.25% (with deductions available)

High-tax state residents face combined federal + state rates that can exceed 35% on long-term gains and over 50% on short-term gains.

States With Preferential Capital Gains Treatment

9 states offer special deductions, exclusions, or lower rates for capital gains that reduce the effective tax rate below the headline income tax rate:

• Arizona (top rate 2.5%): Arizona allows a 25% subtraction of net capital gains, effectively reducing the rate to approximately 1.875%.
• Arkansas (top rate 3.9%): Arkansas provides a 50% exclusion on net capital gains. Capital gains over $10 million from the sale of qualifying Arkansas assets may be fully excluded.
• Hawaii (top rate 7.25%): Hawaii taxes capital gains at a preferential top rate of 7.25%, lower than its top ordinary income rate of 11%. A 50% QSBS exclusion is available for qualifying small business stock.
• Montana (top rate 5.9%): Montana offers a capital gains tax credit that effectively reduces the rate on long-term gains. The credit equals 2% of net capital gains, reducing the effective top rate to approximately 4.1%.
• New Mexico (top rate 5.9%): New Mexico allows a deduction of up to 40% of net capital gains (or $1,000, whichever is greater). This significantly reduces the effective tax rate on capital gains.
• North Dakota (top rate 2.5%): North Dakota allows a 40% deduction on long-term capital gains, effectively reducing the top rate to approximately 1.5%.
• South Carolina (top rate 6.2%): South Carolina allows a 44% deduction on net long-term capital gains, significantly reducing the effective rate to approximately 3.5%.
• Vermont (top rate 8.75%): Vermont allows a 40% exclusion on long-term capital gains from assets held for more than 3 years, up to a maximum exclusion of $350,000.
• Wisconsin (top rate 7.65%): Wisconsin offers a 30% deduction on net long-term capital gains, reducing the effective top rate to approximately 5.355%. The deduction applies to gains from assets held more than one year.

All 50 States + DC: Capital Gains Tax Rates

Here is every state's top marginal capital gains tax rate for the 2025 tax year. Most states tax capital gains as ordinary income at the rates shown:

• Alaska: 0% (no state capital gains tax)
• Florida: 0% (no state capital gains tax)
• Nevada: 0% (no state capital gains tax)
• New Hampshire: 0% (no state capital gains tax)
• South Dakota: 0% (no state capital gains tax)
• Tennessee: 0% (no state capital gains tax)
• Texas: 0% (no state capital gains tax)
• Wyoming: 0% (no state capital gains tax)
• California: 13.3%
• New York: 10.9%
• District of Columbia: 10.75%
• New Jersey: 10.75%
• Oregon: 9.9%
• Minnesota: 9.85%
• Massachusetts: 9% (flat)
• Vermont: 8.75% (with deductions)
• Wisconsin: 7.65% (with deductions)
• Hawaii: 7.25% (with deductions)
• Maine: 7.15%
• Washington: 7% (flat)
• Connecticut: 6.99%
• Delaware: 6.6%
• South Carolina: 6.2% (with deductions)
• Rhode Island: 5.99%
• Montana: 5.9% (with deductions)
• New Mexico: 5.9% (with deductions)
• Maryland: 5.75%
• Virginia: 5.75%
• Idaho: 5.695% (flat)
• Kansas: 5.58%
• Georgia: 5.39%
• Nebraska: 5.2%
• Alabama: 5%
• Illinois: 4.95% (flat)
• West Virginia: 4.82%
• Oklahoma: 4.75%
• Missouri: 4.7%
• Utah: 4.55% (flat)
• Colorado: 4.4% (flat)
• Mississippi: 4.4% (flat)
• Michigan: 4.25% (flat)
• North Carolina: 4.25% (flat)
• Kentucky: 4% (flat)
• Arkansas: 3.9% (with deductions)
• Iowa: 3.8% (flat)
• Ohio: 3.5%
• Pennsylvania: 3.07% (flat)
• Indiana: 3% (flat)
• Louisiana: 3% (flat)
• Arizona: 2.5% (flat) (with deductions)
• North Dakota: 2.5% (with deductions)

Federal Capital Gains Tax Rates (2025)

Regardless of your state, federal capital gains tax applies. For 2025, long-term capital gains rates (assets held over one year) are:

• 0% rate: taxable income up to $48,350 (single) or $96,700 (married filing jointly)
• 15% rate: income from $48,351 to $533,400 (single) or $600,050 (married)
• 20% rate: income above $533,400 (single) or $600,050 (married)
• 3.8% Net Investment Income Tax (NIIT) applies to income over $200,000 (single) or $250,000 (married)

Short-term capital gains (assets held one year or less) are taxed at your ordinary federal income tax rate, ranging from 10% to 37%.

How State Capital Gains Tax Affects Your Investments

The difference between living in a no-tax state versus a high-tax state is significant. Consider a $100,000 long-term capital gain for a taxpayer in the 15% federal bracket:

Strategies to Minimize State Capital Gains Tax

1. Hold investments for over one year to qualify for lower federal long-term capital gains rates. While most states don't differentiate, the federal savings are substantial.
2. Use tax-loss harvesting: sell losing positions to offset gains. This works at both federal and state levels.
3. Maximize tax-advantaged accounts (401(k), IRA, Roth IRA, HSA) where gains grow tax-deferred or tax-free — this avoids both state and federal capital gains tax.
4. Time your gains: realize large gains in years when your income (and tax bracket) is lower.
5. Consider charitable giving: donating appreciated securities avoids capital gains tax entirely and provides a tax deduction.
6. Use the primary residence exclusion: up to $250,000 ($500,000 married) in home sale gains is excluded from both federal and state tax.
7. For retirees: consider your state of residency carefully. Some retirees relocate to no-tax states before selling appreciated assets.

Bottom Line

State capital gains tax can add 0% to 13.3% on top of your federal rate. The 8 states with no capital gains tax — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Wyoming — offer the greatest advantage for investors. If you live in a high-tax state, strategies like tax-loss harvesting, tax-advantaged accounts, and timing your gains can meaningfully reduce your total bill. Use our calculator to estimate your federal capital gains tax, then add your state rate for a complete picture.