States with the lowest capital gains tax
The lowest-tax jurisdictions for capital gains are the 8 with no state tax on gains - investors there pay only the federal rate (up to 23.8% on long-term gains). Among states that do tax gains, the lowest combined rates belong to those with a low flat rate or a generous long-term exclusion, such as North Dakota (40% exclusion) at roughly 25.3% combined. Top-bracket illustration, not tax advice.
Source: Tax Foundation, 2026 state income tax rates. Data as of June 2026.
20 lowest states by combined capital gains tax
| # | State | State effective rate | Treatment | Combined top long-term |
|---|---|---|---|---|
| 1 | Alaska | 0% | No state capital gains tax | 23.8% |
| 2 | Florida | 0% | No state capital gains tax | 23.8% |
| 3 | Nevada | 0% | No state capital gains tax | 23.8% |
| 4 | New Hampshire | 0% | No state capital gains tax | 23.8% |
| 5 | Oklahoma | 0% | 100% exclusion | 23.8% |
| 6 | South Dakota | 0% | No state capital gains tax | 23.8% |
| 7 | Tennessee | 0% | No state capital gains tax | 23.8% |
| 8 | Texas | 0% | No state capital gains tax | 23.8% |
| 9 | Wyoming | 0% | No state capital gains tax | 23.8% |
| 10 | North Dakota | 1.5% | 40% exclusion | 25.3% |
| 11 | Arizona | 1.875% | 25% exclusion | 25.675% |
| 12 | Arkansas | 1.95% | 50% exclusion | 25.75% |
| 13 | Idaho | 2.12% | 60% exclusion | 25.92% |
| 14 | Ohio | 2.75% | Taxed as ordinary income | 26.55% |
| 15 | Indiana | 2.95% | Taxed as ordinary income | 26.75% |
| 16 | Louisiana | 3% | Taxed as ordinary income | 26.8% |
| 17 | Pennsylvania | 3.07% | Taxed as ordinary income | 26.87% |
| 18 | South Carolina | 3.36% | 44% exclusion | 27.16% |
| 19 | Kentucky | 3.5% | Taxed as ordinary income | 27.3% |
| 20 | New Mexico | 3.54% | 40% exclusion | 27.34% |
Source: Tax Foundation, 2026 state income tax rates. Data as of June 2026.
Combined = federal 23.8% + state effective top long-term rate. The 8 no-tax states share the lowest combined rate.
Frequently asked questions
Which state has the lowest capital gains tax?
The 8 no-income-tax jurisdictions tie for the lowest, charging 0% at the state level so investors face only the federal rate (up to 23.8% long-term). Among states that do tax gains, North Dakota is among the lowest thanks to 40% exclusion, for a combined top of about 25.3%.
Are low-tax states actually cheaper for investors?
For capital gains specifically, yes - a no-state-tax state can save you several percentage points on a large gain. But total tax cost depends on sales, property and other taxes too, and federal capital gains tax (the larger share) is the same everywhere.
How do states get such low effective rates on gains?
Some have low flat income rates (North Dakota's top rate is just 2.5%); others give a generous long-term exclusion that cuts the effective rate sharply (Arkansas 50%, South Carolina 44%, Arizona's 25% subtraction). Each state's page explains the exact mechanism.
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Last updated: 2026-06-21