Which states have the highest capital gains tax?
California generally ranks as the most expensive state for long-term capital gains. This is because it treats capital gains as regular income. The state subjects them to its top personal income tax rate — 13.3%.
Why do capital gains get taxed so distinctly by state?
Long-term gains are lumped together with the wages & other income in most US states. In other words, in the case of having a high-income year — like when you sell a business or large asset — you get pushed into the state’s highest tax bracket.
For 2026 planning, the presented states tend to sit at the top because of their highest marginal tax rates:
*Most of these states apply their regular top income-tax rate to long-term gains.
If you live in New York City, a separate city income tax can stack on top of the state rate.
Is Washington “high” even though it has no income tax?
Yes. It’s true that Washington has no income tax. Yet, it charges a specific capital gains excise tax. Once the long-term gains cross the standard deduction threshold — $278,000 for tax year 2025 — the tax steps into the picture. Taxpayers pay 7% on the first $1 million of taxable gain and 9.9% on anything above that amount.
Where can the state capital gains rate be 0%?
In the case of living in a state with no personal income tax, taxpayers generally won’t owe state tax on their capital gains — though federal taxes still apply. As of 2026, the states are listed as follows:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Wyoming
Get a state by state capital gains plan from Clarity Tax Group
Reach out to Clarity Tax Group before selling. Our team can custom-build your return as well as your payment strategy around the actual state exposure.
- Multi-state residency & allocation review
- Gain & loss strategy linked with the wider tax picture
- Prepayment & withholding planning when applicable
- Preparation support for federal & state filings