State Capital Gains Tax Rates for 1031 Exchanges: All 50 States
Every state's top capital gains tax rate on a real estate sale, in one table. 8 states charge nothing; California tops out at 13.3%. Whatever your state charges, it stacks on top of federal capital gains (15–20%), depreciation recapture (25%), and the 3.8% NIIT — and a properly executed 1031 exchange defers all of it.
- 8 states levy no state capital gains tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Wyoming
- Highest state rate: California at 13.3%, then New York (10.9%) and New Jersey (10.75%)
- Average top state rate: 5.0% across all 50 states + DC
- Federal layers on every sale: 15–20% long-term capital gains + 25% depreciation recapture + 3.8% NIIT for higher incomes
- One state claws back: California tracks deferred gains that leave the state (FTB Form 3840)
- Worst single market: New York City — combined city + state hit of 14.776% before any federal tax
The full table: state capital gains rates on real estate sales
Rates shown are each state's top marginal rate as applied to capital gains on investment real estate (most states tax gains as ordinary income). Click any state for the full 1031 exchange guide for that market.
| State | Top capital gains rate | 1031 notes |
|---|---|---|
| Alabama | 5% | |
| Alaska | 0% (none) | No state capital gains tax |
| Arizona | 2.5% | |
| Arkansas | 4.4% | |
| California | 13.3% | Clawback — FTB Form 3840 annual reporting |
| Colorado | 4.4% | |
| Connecticut | 7% | |
| Delaware | 6.6% | |
| Florida | 0% (none) | No state capital gains tax |
| Georgia | 5.39% | |
| Hawaii | 7.25% | |
| Idaho | 5.8% | |
| Illinois | 4.95% | |
| Indiana | 3% | |
| Iowa | 3.8% | |
| Kansas | 5.7% | |
| Kentucky | 4% | |
| Louisiana | 4.25% | |
| Maine | 7.15% | |
| Maryland | 5.75% | |
| Massachusetts | 9% | |
| Michigan | 4.25% | |
| Minnesota | 9.85% | |
| Mississippi | 4.4% | |
| Missouri | 4.7% | |
| Montana | 5.9% | |
| Nebraska | 5.84% | |
| Nevada | 0% (none) | No state capital gains tax |
| New Hampshire | 0% (none) | No state capital gains tax |
| New Jersey | 10.75% | |
| New Mexico | 5.9% | |
| New York | 10.9% | |
| North Carolina | 4.5% | |
| North Dakota | 2.5% | |
| Ohio | 3.5% | |
| Oklahoma | 4.75% | |
| Oregon | 9.9% | |
| Pennsylvania | 3.07% | |
| Rhode Island | 5.99% | |
| South Carolina | 6.2% | |
| South Dakota | 0% (none) | No state capital gains tax |
| Tennessee | 0% (none) | No state capital gains tax |
| Texas | 0% (none) | No state capital gains tax |
| Utah | 4.65% | |
| Vermont | 8.75% | |
| Virginia | 5.75% | |
| Washington | 7% | |
| West Virginia | 5.12% | |
| Wisconsin | 7.65% | |
| Wyoming | 0% (none) | No state capital gains tax |
How to read this table for a 1031 exchange
The state rate is only one of four tax layers on an investment property sale. A seller with a $500,000 gain in a mid-rate state typically faces $150,000–$200,000 in combined federal and state tax — run your own numbers here. A 1031 exchange defers every layer: federal capital gains, depreciation recapture, NIIT, and the state tax, provided the 45-day and 180-day deadlines are met and a qualified intermediary holds the proceeds.
Exchanging between states is fully allowed under federal rules and extremely common — the classic pattern is selling in a high-tax coastal state and buying in a no-tax state. The one structure to plan around is California's clawback, which follows deferred California gains across state lines.
Citing this data
This table is maintained as the source data behind leahbadach.com's 51 state-by-state 1031 guides and is updated when state rates change. Journalists and researchers are welcome to cite it with attribution: "Source: Leah Badach, CES — leahbadach.com state capital gains dataset, 2026." For interviews or custom data pulls, see the press page.
Frequently asked questions
Which states have no capital gains tax in 2026?
8 states levy no state tax on capital gains: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Wyoming. Sellers there still owe federal capital gains tax (15–20%), depreciation recapture (25%), and possibly the 3.8% Net Investment Income Tax — all of which a 1031 exchange defers.
Which state has the highest capital gains tax?
California at 13.3%, followed by New York (10.9%), New Jersey (10.75%), Oregon (9.9%). State tax stacks on top of the federal layers, which is why combined tax on a sale often reaches 30–40% of the gain in high-tax states.
Does a 1031 exchange defer state capital gains tax too?
Yes, in nearly every state. States generally conform to IRC Section 1031, so a valid exchange defers both the federal and state tax. The notable wrinkle is California's clawback: exchange out of California and the state tracks your deferred gain on FTB Form 3840 until the replacement property is finally sold.
Can I exchange property from a high-tax state into a no-tax state?
Yes — federal 1031 rules allow exchanges between any U.S. states, and it's one of the most common patterns: New York, California, and Illinois sellers exchanging into Texas, Florida, or Tennessee. Watch for state-specific rules like California's clawback before assuming the deferred gain escapes the origin state forever.
Selling in a high-tax state?
Leah has run 5,000+ exchanges across all 50 states. A 30-minute call maps exactly what your state and the IRS would take — and how to defer it.
See If I Qualify1031 savings calculator · All 1031 rules · All 50 state guides