State Capital Gains Rates on Real Estate: All 50 States Compared

Nine states do not tax an individual's real estate gain at all

These states have no personal income tax on capital gains, so the state layer of a sale is zero; transfer taxes and closing costs still apply. Washington is the one to read closely: its capital gains excise under RCW 82.87.040 is 7%, plus 2.9% on gains above $1 million from 2025, but RCW 82.87.050 exempts all real estate transferred by deed and, to the extent of directly owned real estate, interests in privately held entities.

• Alaska: no personal income tax.
• Florida: no personal income tax; the state constitution bars one.
• Nevada: no personal income tax.
• New Hampshire: no tax on wages or gains; the interest and dividends tax ended in 2025.
• South Dakota: no personal or corporate income tax.
• Tennessee: no tax on an individual's gain.
• Texas: no income tax, and a 2025 constitutional amendment bars a capital gains tax.
• Washington: real estate is exempt from the capital gains excise; the Department of Revenue says a 9.9% tax on income over $1 million starts January 1, 2028.
• Wyoming: no personal income tax.

Nine states give long-term gains a deduction, an exclusion or a lower rate

The breaks differ in what qualifies. A.R.S. 43-1022 subtracts 25% of net long-term gain only on assets acquired after December 31, 2011. 32 V.S.A. 5811 allows the first $5,000 or 40% of gain on assets held more than three years, capped at 40% of federal taxable income or $350,000, and excludes a home. S.C. Code 12-6-1150 deducts 44% of net capital gain, and North Dakota's chapter 57-38 excludes 40% of net long-term gain allocated to the state.

Wisconsin's Publication 103 deducts 30% of net gain on assets held more than a year, 60% for farm assets. Hawaii's Form N-11 instructions cap the tax on net long-term gain at 7.25%, MCA 15-30-2103 taxes Montana long-term gains at 3.0% and 4.1%, and the Missouri Department of Revenue lets individuals subtract 100% of federal capital gain from 2025.

• Arizona: flat 2.5% on 75% of qualifying long-term gain.
• Arkansas: 3.7% top rate for 2026, applied to half of net capital gain.
• Hawaii: alternative tax caps net long-term gain at 7.25%.
• Missouri: capital gain subtracted in full; rent and recaptured income still face 4.7%.
• Montana: 3.0% up to $47,500 single or $95,000 joint, then 4.1%.
• North Dakota: 40% excluded, top rate 2.5%, so 1.5% at most.
• South Carolina: 44% deducted; 2026 rates 1.99% and 5.21%.
• Vermont: 40% exclusion for assets held over three years, within the caps; brackets reach 8.75%.
• Wisconsin: 30% deduction; top rate 7.65%, about 5.4% on the gain.

Thirteen flat-tax states charge the same rate on a gain as on a paycheck

In these states the gain is simply added to income and taxed at one rate, so the holding period does not matter at the state level.

• Colorado: 4.40% by statute, reduced in some years under TABOR.
• Georgia: 4.99% for 2026.
• Idaho: 5.3%.
• Illinois: 4.95%.
• Indiana: 2.95% for 2026, plus county tax.
• Iowa: 3.8%.
• Kentucky: 3.5% for 2026.
• Louisiana: 3% since 2025.
• Michigan: 4.25% for 2026.
• Mississippi: 4% on income over $10,000 for 2026.
• North Carolina: 3.99% for 2026.
• Pennsylvania: 3.07%; gain is its own income class.
• Utah: 4.5%.

Nineteen states tax the gain through graduated brackets or a surtax, and the top rate is the one that counts

A large gain usually lands in the top bracket, so the top rate is the one to plan around. California adds the 1% Behavioral Health Services Tax on taxable income over $1 million, per the 2025 Form 540 booklet, on top of its 12.3% bracket. Massachusetts General Laws chapter 62, section 4 adds 4% on taxable income over $1 million, indexed for inflation. Minnesota adds a 1% tax on net investment income over $1 million, and New York City residents add city tax.

• Alabama: 5% top rate.
• California: 12.3% plus 1% over $1 million.
• Connecticut: 6.99% top rate.
• Delaware: 6.6% above $60,000.
• Kansas: 5.58% top rate.
• Maine: 7.15% top rate.
• Maryland: 6.5% top rate, plus county tax.
• Massachusetts: 5% long-term, 8.5% short-term, plus 4% surtax.
• Minnesota: 9.85% top rate plus 1% on investment income over $1 million.
• Nebraska: 4.55% for 2026.
• New Jersey: 10.75% over $1 million.
• New Mexico: 5.9% top rate.
• New York: 10.9% top rate, plus up to 3.876% in New York City.
• Ohio: 2.75% for 2026.
• Oklahoma: 4.5% top rate for 2026.
• Oregon: 9.9% above $125,000 single.
• Rhode Island: 5.99% top rate.
• Virginia: 5.75% top rate.
• West Virginia: 4.58% top rate for 2026.

Worked example: the same $500,000 gain in five states

Hypothetical, round figures. A single owner sells a rental bought in 2015 and realizes a $500,000 long-term gain. In Texas the state tax is zero. In Arizona it is 2.5% of $375,000 after the 25% subtraction, $9,375. Applying each state's top rate to the whole gain gives an upper bound elsewhere: about $14,600 in South Carolina (5.21% of the 56% left after the deduction), about $26,800 in Wisconsin, and $61,500 in California before the 1% layer.

The spread between Texas and California is more than $60,000 on one sale, before the federal layers covered in capital gains tax on rental property. Brackets, credits and depreciation will move every figure, so run your own numbers with your CPA.

A 1031 exchange defers the state layer in conforming states, though some keep a claim on the gain

Because most income-tax states compute tax from federal adjusted gross income, gain deferred under section 1031 never enters the state base. Some states track the deferred gain when replacement property is out of state: California requires Form FTB 3840 every year, Oregon uses Form OR-24 and Montana treats the gain as Montana-source until it is recognized. Does a 1031 defer state capital gains tax covers those rules.

Several states also withhold a share of the price at closing unless the seller certifies an exchange; states that withhold at closing lists the forms. Replacement property can be a fractional interest in a traditional DST, which lets a seller in a high-rate state keep the whole state layer invested.