Investors who sell profitable stocks, real estate, or other assets face a two-layer tax hit: federal taxes plus whatever their state charges. The federal government taxes long-term capital gains at 0%, 15%, or 20% depending on income, but nine states impose their own capital gains taxes on top of that.
Washington state charges a 7% tax on long-term capital gains over $250,000. Illinois taxes long-term gains at 4.5%. New Jersey, Oregon, Vermont, Minnesota, Connecticut, and California also levy their own rates, ranging from 5% to 13.3%. Hawaii and Washington, D.C. round out the list with capital gains taxes as well.
This means a high-income investor in California selling a stock for a $100,000 profit could owe 20% federal tax (plus 3.8% net investment income tax), combined with California's top state rate of 13.3%. That totals roughly 37% of gains going to taxes before considering any local levies.
States without capital gains taxes include Florida, Texas, Nevada, and Wyoming. These states attract wealthy investors specifically because capital gains escape state taxation entirely.
The rates matter most for long-term holdings. Gains on assets held over one year qualify for preferential long-term rates. Short-term gains, taxed like ordinary income, face state income tax rates that often run higher than dedicated capital gains taxes.
Investors planning to sell appreciated assets should review their state's tax treatment before executing trades. Some consider timing sales around income thresholds or relocating before major transactions. Tax-loss harvesting allows pairing gains with losses to reduce taxable income.
For 2026, tracking your state's exact rate is essential. A move from California to Nevada could save tens of thousands in taxes on a large stock sale. Those holding investments in high-tax states