State Capital Gains Tax by State (2026)

How Most States Tax Capital Gains: As Ordinary Income

In contrast to the federal model, which provides preferential long-term capital-gains rates of 0%, 15%, or 20% depending on filer income, almost every state with an income tax treats both short-term and long-term capital gains as ordinary income, applying the same bracket rates that apply to wages.

Practical implication: a $100,000 long-term capital gain by a California resident with substantial wage income is taxed at California ordinary rates, which top at 13.3% for income above $1M but more typically land in the 9.3% bracket for moderate-high earners. A federal 15% long-term capital-gains rate plus California 9.3% state rate produces a combined federal-plus-state effective rate of approximately 24.3% on the gain.

For a New York resident the same gain at federal 15% plus NY state 6.85% (for moderate-high incomes) produces a combined effective rate of approximately 21.85%. For a NYC resident add NYC 3.876%, producing combined federal-plus-state-plus-city of roughly 25.7%. The state-and-local stack on capital gains can rival the federal preferential rate, eroding the federal benefit substantially in high-tax states.

The Washington Surcharge

Washington is the unique outlier: a state with no broad personal income tax that nevertheless imposes a separately-rated capital-gains tax. Per RCW 82.87, the Washington Capital Gains Tax of 7% applies to individual long-term capital gains exceeding $250,000 in a tax year. The tax was enacted in 2021 (Senate Bill 5096) effective 1 January 2022, and survived a constitutional challenge in Quinn v. State (Wash. Sup. Ct. 24 March 2023), in which the Court held the tax was an excise tax (constitutional) rather than a property tax (which would have required a uniformity clause).

Several exclusions apply. Real-estate capital gains are excluded. Retirement-account distributions (401(k), IRA, pension) are excluded. Sales of small businesses meeting the qualified family-owned-business test (under WA-specific thresholds) are excluded. Charitable contributions of long-term gain property are deductible from the gain. Interest, dividends, short-term capital gains and wage income are not subject to the tax.

For a Washington resident realising $500,000 in long-term stock gains in 2026, the calculation: $500,000 minus the $250,000 exemption = $250,000 of taxable gain, multiplied by 7% = $17,500 in WA state capital-gains tax. Federal long-term capital-gains tax (15% or 20% depending on income) applies on top, separately. The $250,000 exemption is per individual, not per couple, so a married couple realising $500,000 collectively can still face the surcharge if the gain is concentrated to one spouse.

The 50-State (plus DC) Capital Gains Tax Map

Top state rate applied to capital gains, treatment (ordinary income with regular brackets, flat-rate, or special), and notes on exclusions or preferential treatment.

Sources: each state's 2026 Department of Revenue published rates and capital-gains treatment guidance; Washington RCW 82.87 (capital gains tax statute); Quinn v. State (Wash. 2023). Exclusion percentages are state-specific; verify with the relevant DOR before filing.

The Partial-Exclusion States

A handful of states provide partial exclusions for long-term capital gains, reducing the effective state tax rate on long-held assets:

• South Carolina: 44% deduction for net long-term capital gains, the largest among states. A $100,000 LTCG by an SC resident is reduced by $44,000 for state tax purposes; the remaining $56,000 is taxed at SC's 6.2% top rate, producing approximately $3,470 in state tax. This is the most generous partial exclusion in the US.
• Vermont: 40% exclusion for LTCG held at least 3 years. Encourages long-term investment.
• North Dakota: 40% deduction for net LTCG.
• New Mexico: 40% deduction for net LTCG.
• Wisconsin: 30% exclusion for net LTCG.
• Montana: 30% credit for net LTCG (note: credit not deduction; the math differs).
• Arkansas: 50% LTCG exclusion (one of the largest by percentage).
• Hawaii: Caps the long-term capital-gains rate at 7.25%, even when the regular bracket would produce a higher rate (Hawaii's top is 11%). For high-income Hawaii residents this is the practical equivalent of a preferential LTCG rate.

For investors planning concentrated stock sales, the choice of state of residence at the time of sale can produce material tax differences. A $1 million long-term capital gain realised in California costs $93,000 in state tax (9.3% rate). The same gain in Texas costs zero. The same gain in Washington costs $52,500 (7% on $750K above the $250K exemption). The same gain in South Carolina costs approximately $34,720 ($560K of taxable gain after 44% deduction, at 6.2%).

Federal-Plus-State Combined Rates

For a single filer realising a $200,000 long-term capital gain in 2026, the combined federal-plus-state effective rate on the gain by state of residence (federal 15% LTCG rate applies for incomes between approximately $48,350 and $533,400 single, plus federal 3.8% Net Investment Income Tax above $200K MAGI):

Federal rate of 18.8% = 15% LTCG plus 3.8% Net Investment Income Tax (NIIT) for single filer with MAGI above $200K. For very high incomes ($533,400+ single in 2026), federal LTCG rate climbs to 20% plus NIIT 3.8% = 23.8%. State rates as published 2026.

Real Estate Capital Gains: A Common Special Case

Real estate capital gains are taxed by states the same way as other capital gains, with a few exceptions. The federal $250,000 (single) / $500,000 (MFJ) primary-residence exclusion under IRC section 121 applies for federal purposes; most states conform to this exclusion for state purposes. The remaining gain (above the exclusion) is taxed at state ordinary rates.

Washington's 7% capital-gains tax explicitly excludes real estate gains, regardless of amount. This means a Washington resident selling a Seattle home with a $500,000 gain (above the federal exclusion) pays zero Washington state tax on the gain; only federal applies. The same $500,000 gain in California is taxed at California ordinary rates (up to 13.3%), producing roughly $46,500 in state tax (after the federal section 121 exclusion).

For non-resident sellers of in-state real estate, most states impose the state non-resident tax on the gain regardless of the seller's state of residence. A California resident selling a New York rental property pays New York non-resident tax on the New York-source real-estate gain at NY rates, then files California reporting the gain and claims credit for NY tax paid on Form 540 Schedule S. The state-of-property generally has primary tax claim on real-estate gains.