What is the state tax rate for capital gains?

Federal rates are 0%, 15%, or 20%, depending on marital status and taxable income. Each state can also have a capital gains tax, but each of them deals with it. Each state may also have a capital gains tax, but each one treats them slightly differently. Only eight states have no income taxes: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming.

Depending on your tax bracket, any significant benefits derived from short-term gains could lead to a higher tax rate. It is taxed as income and the highest income tax rate is 6.90%, but with a capital gains credit of 2%, this rate is technically 4.9%. Since tax rates on long-term earnings are likely to be more favorable than short-term gains, monitoring how long you have held a position in an asset could be beneficial in reducing your tax bill. However, with real estate, you may be able to avoid some of the tax impact, due to special tax rules.

A financial advisor could help you determine your tax liability and create a tax plan to maximize your investments. Some other states offer capital gains tax exemptions only for investments in the state or specific industries. Capital gains taxes are a type of tax on profits earned from the sale of assets such as stocks, real estate, businesses, and other types of investments in accounts without tax advantages. While capital gains taxes can be annoying, some of the best investments, such as stocks, allow you to skip taxes on your profits as long as you don't make those gains by selling the position.

Unlike the long-term capital gains tax rate, there is no 0 percent rate and no 20 percent limit on short-term capital gains taxes. Of the states that do collect income tax, nine of them tax long-term capital gains less than ordinary income. After states without capital gains, the next group of states has a rate that is between zero and the ordinary income rate. In these states, you're only subject to federal capital gains, which are typically lower than your ordinary income tax rate.

In general, you'll pay state taxes on your capital gains in addition to federal taxes, although there are some exceptions.

Glenna Penrod
Glenna Penrod

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