Selling property can be a major milestone — but it also raises an important question: how much will you owe in taxes?
While federal capital gains rules apply uniformly across the U.S., state tax laws differ widely, and those differences can significantly affect your profit.
This guide compares state-by-state capital gains taxes on real estate, helping you understand how varying tax structures—from no income tax to progressive rates—can shape your final proceeds.
How States Tax Real Estate Capital Gains
When you sell real estate, any profit you make above your original purchase price (plus certain improvements and selling costs) is generally considered a capital gain. This gain becomes taxable income on your federal tax return.
Your state may or may not tax the capital gain, based on state tax law, how long you owned the property, and whether you qualify for any special exclusions.
Primary Ways States Handle Capital Gains
States employ different methods for taxing capital gains through their state income tax systems.
Want to calculate your specific state’s capital gains tax? Click any state name below to access detailed guides with interactive calculators and complete tax rate breakdowns.
🚫 States that don’t tax capital gains on real estate
A handful of states do not have state income tax at all, so they don’t tax capital gains, including Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming.
Washington state does tax capital gains, but we place it in the ‘No Tax’ category because Washington does not tax capital gains from real estate sales.
% States that tax capital gains at a flat rate
In many states, a flat percentage applies to all your capital gains. This includes Arizona, Colorado, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Michigan, Mississippi, North Carolina, Pennsylvania, and Utah.
Massachusetts is a special case with two flat rates depending on the holding period (5% for long-term, 8.5% for short-term).
📈 States with graduated income tax rates
The majority of states use a graduated income tax system where your capital gains are taxed at different rates based on your income level. These states include Alabama, Arkansas, California, Connecticut, Delaware, Kansas, Maine, Maryland, Minnesota, Missouri, Montana, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, Vermont, Virginia, West Virginia, and Wisconsin.
State-Specific Exclusions and Deductions
Even in states that do tax capital gains, there can be opportunities to reduce your taxable income. Many states offer tax deduction or capital gains exemption programs that can lower your overall tax burden.
Often these deductions are only for long-term capital gains, defined as held for more than one year in most states, but some states have longer holding periods.
Some states also give farmers a break on capital gains tax.
If you need a primer on calculating capital gains before diving into state-specific rules, you can learn more here: Understanding Capital Gains Tax on Real Estate.
State-by-State Capital Gains Tax on Real Estate: A Comparison Table
Here’s a comprehensive look at how each state handles capital gains tax on real estate.
State capital gains tax rates by state
This table shows how each state taxes capital gains from real estate and other investments. Rates and rules vary significantly by state.
| State | Tax Type | Description | Exclusions |
|---|---|---|---|
| Alabama | Graduated | Taxes capital gains at the same rate as ordinary income, with rates up to 5%. | None. |
| Alaska | None | No state income or capital gains tax. | None. |
| Arizona | Flat | Taxes capital gains at the same rate as ordinary income, a flat 2.5%. | None. |
| Arkansas | Graduated | Taxes capital gains at the same rate as ordinary income, with rates up to 3.9%. | 50% of long-term capital gains may be exempt. |
| California | Graduated | Taxes capital gains at the same rate as ordinary income, with rates up to 13.3%. | None. |
| Colorado | Flat | Taxes capital gains at the same rate as ordinary income, a flat 4.4%. | Subtraction up to $100k for qualifying sales of agricultural real property. |
| Connecticut | Graduated | Taxes capital gains as ordinary income, with rates up to 6.99% | None. |
| Delaware | Graduated | Taxes capital gains at the same rate as ordinary income, with rates up to 6.6%. | None. |
| Florida | None | No state income or capital gains tax. | None. |
| Georgia | Flat | Taxes capital gains at the same rate as ordinary income, a flat 5.39%. | None. |
| Hawaii | Flat | Taxes capital gains at a flat rate of 7.25%. | None. |
| Idaho | Flat | Taxes capital gains at the same rate as ordinary income, a flat 5.695%. | 60% deduction for gains from the sale of qualifying Idaho real estate. |
| Illinois | Flat | Taxes capital gains at the same rate as ordinary income, a flat 4.95%. | None. |
| Indiana | Flat | Taxes capital gains at the same rate as ordinary income, a flat 3%. | None. |
| Iowa | Flat | Taxes capital gains at the same rate as ordinary income, a flat 3.8%. | None. |
| Kansas | Graduated | Taxes capital gains at the same rate as ordinary income, with rates up to 5.58%. | None. |
| Kentucky | Flat | Taxes capital gains at the same rate as ordinary income, a flat 4%. | None. |
| Louisiana | Flat | Taxes capital gains at the same rate as ordinary income, a flat 3%. | None. |
| Maine | Graduated | Taxes capital gains at the same rate as ordinary income, with rates up to 7.15%. | None. |
| Maryland | Graduated | Taxes capital gains at the same rate as ordinary income, with rates up to 5.75%. | None. |
| Massachusetts | Flat | Taxes long-term capital gains at 5% and short-term capital gains at 8.50%. | None. |
| Michigan | Flat | Taxes capital gains at the same rate as ordinary income, a flat rate of 4.25%. | None. |
| Minnesota | Graduated | Taxes capital gains at the same rate as ordinary income, with rates up to 9.85%. | None. |
| Mississippi | Flat | Taxes capital gains at the same rate as ordinary income, a flat 4.4%. | None. |
| Missouri | Graduated | Taxes capital gains at the same rate as ordinary income, with rates up to 4.70%. | None. |
| Montana | Graduated | Short-term gains are taxed as ordinary income. Long-term gains are taxed at 3.0% up to $21,100 ($42,200 for joint filers) and 4.1% on amounts above that. |
None. |
| Nebraska | Graduated | Taxes capital gains at the same rate as ordinary income, with rates up to 5.2%. | None. |
| Nevada | None | No state income or capital gains tax. | None. |
| New Hampshire | None | No state income or capital gains tax. | None. |
| New Jersey | Graduated | Taxes capital gains at the same rate as ordinary income, with rates up to 10.75%. | None. |
| New Mexico | Graduated | Taxes capital gains at the same rates as ordinary income, with rates up to 5.9%. | Exclusion for 40% of long-term capital gains, up to the first $1,000,000 of capital gain. |
| New York | Graduated | Taxes capital gains as ordinary income, with rates up to 10.9%. | None. |
| North Carolina | Flat | Taxes capital gains at the same rate as ordinary income, a flat rate of 4.25%. | None. |
| North Dakota | Graduated | Taxes capital gains at the same rate as ordinary income, with rates up to 2.5%. | Deduction of up to 40% of long-term capital gains. |
| Ohio | Graduated | Taxes capital gains at the same rate as ordinary income, with rates up to 3.5%. | None. |
| Oklahoma | Graduated | Taxes capital gains at the same rate as ordinary income, with rates up to 4.75%. | 100% deduction available for qualifying real property held for at least 5 years. |
| Oregon | Graduated | Taxes capital gains at the same rate as ordinary income, with rates up to 9.9%. | 25% deduction on long-term capital gains from the sale of qualifying farm property. |
| Pennsylvania | Flat | Taxes capital gains at the same rate as ordinary income, a flat rate of 3.07%. | None. |
| Rhode Island | Graduated | Taxes capital gains at the same rate as ordinary income, with rates up to 5.99%. | None. |
| South Carolina | Graduated | Taxes capital gains at the same rate as ordinary income, with rates up to 6.2%. | Deduction of up to 44% of long-term capital gains. |
| South Dakota | None | No state income or capital gains tax. | None. |
| Tennessee | None | No state income or capital gains tax. | None. |
| Texas | None | No state income or capital gains tax. | None. |
| Utah | Flat | Taxes capital gains at the same rate as ordinary income, a flat rate of 4.55%. | None. |
| Vermont | Graduated | Taxes capital gains held under 3 years at the same rate as ordinary income, with rates up to 8.75%. | Two exclusions to choose from for assets held over 3 years. Flat Exclusion: Up to $5,000, or the gain amount—whichever is less. Percentage Exclusion: Exclude 40% of the gain (up to $350,000), but not for primary residence. |
| Virginia | Graduated | Taxes capital gains at the same rate as ordinary income, with rates up to 5.75%. | None. |
| Washington | None | Taxes capital gains at 7% for gains between $270,000 and $1 million. Above $1M, capital gains are taxed at 9.9%. | Real estate sales in Washington state are exempt from capital gains tax. |
| West Virginia | Graduated | Taxes capital gains at the same rate as ordinary income, with rates up to 4.82%. | None. |
| Wisconsin | Graduated | Taxes capital gains at the same rate as ordinary income, with rates up to 7.65%. | 30% deduction for long-term capital gains. 60% deduction for long-term capital gains from farm assets. |
| Wyoming | None | No state income or capital gains tax. | None. |
Key Differences and Trends Across States
Looking at the table, one key trend emerges regarding capital gains tax across the U.S.
States with graduated income tax rates often represent the highest capital gains tax states. California, New York, Oregon, and Minnesota impose the highest potential tax burdens on real estate capital gains.
Regional patterns also exist. Eight of the nine Northeast states have graduated rates.
Important Considerations When Selling Real Estate in Different States
Understanding the state-specific capital gains tax rate is just one piece of the puzzle. Here are other crucial factors to consider:
Residency vs. Property Location: Both your state of residency and the state where your property is located can impact your tax obligations. You might owe taxes in both states, though most states offer tax credits to prevent true double taxation. It’s a complex area that often requires expert guidance. Non-Resident Withholding Requirements: Some states require a percentage of the sale price to be withheld from non-resident sellers at the time of closing. This isn’t an additional tax, but rather an upfront payment that the state holds against your eventual tax liability.
Frequently Asked Questions (FAQ)
What states have zero capital gains tax?
States that do not have a state income tax effectively have zero state capital gains tax on real estate. These include Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming.
Washington has a capital gains tax but specifically exempts real estate sales from this tax, so it effectively has zero capital gains tax on real estate.
Is land taxable as a capital gain?
Yes, absolutely. When you sell land for more than you bought it for (plus the cost of any improvements and selling expenses), the profit is considered a capital gain. This gain is subject to both federal and potentially state capital gains taxes, just like other real estate.
At what age do you no longer have to pay capital gains tax?
There is no specific age at which you are automatically exempt from paying capital gains tax. Capital gains tax is based on the profit from the sale of an asset, not on the seller’s age. While there are special tax considerations for seniors (e.g., relating to retirement income), these do not typically include a blanket exemption from capital gains tax on property sales.
Which states have the highest capital gains tax?
The states with the highest capital gains tax rates (ranging from 7% to 13%) are California, New York, New Jersey, Oregon, Minnesota, Vermont, Maine, and Wisconsin.
These states all use graduated income tax systems where capital gains are taxed at the same rates as ordinary income. See the table above for specific tax rates and exclusions for each state.
Conclusion: Making Informed Decisions When Selling Land
Navigating the landscape of capital gains tax on real estate can be daunting, especially with varying state tax rates and exclusions. Understanding these differences can help plan where you want to invest in real estate and what to expect when you sell. By being informed about potential tax liabilities, you can make smarter decisions.
Please consult your financial advisor, accountant, real estate attorney, or tax specialist. This article is for informational purposes and is not tax or legal advice.
