What each state takes when you sell a rental
Federal tax on a rental sale splits in two: depreciation recapture at ordinary rates up to a 25% ceiling, and long-term capital gain on the appreciation. Most states do no such thing. They start from your federal taxable income and tax the whole recognized gain at their regular rate — recapture and appreciation alike, at one number.
That single fact is missing from nearly every state-by-state table on the internet, and it is the one that changes the arithmetic. Here is what each state takes, what makes each one different, and where the table stops being reliable.
Of the 51 jurisdictions below, 10 take nothing at all from the gain: Alaska, Florida, Missouri, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming. Most get there by having no income tax; a couple arrive by a different route, and the note beside each one says which. At the other end, Oregon takes about 9.90% — $9,900 on a $100,000 gain. The middle of the states that do tax it sits near 4.95%.
| State | Rate on the gain | Tax on $100,000 | What makes it different |
|---|---|---|---|
| Alabama | 5.00% | $5,000 | Top rate 5% — brackets top out quickly. |
| Alaska | 0.00% | $0 | No state income tax. |
| Arizona | 1.88% | $1,880 | 2.5% flat with a 25% LTCG subtraction (assets acquired after 2011). |
| Arkansas | 1.85% | $1,850 | 3.7% top rate with a 50% capital-gain exclusion. |
| California | 9.30% | $9,300 | Typical bracket for large gains; up to 13.3% at very high incomes. |
| Colorado | 4.40% | $4,400 | Flat 4.4%. |
| Connecticut | 6.99% | $6,990 | Top rate 6.99%. |
| Delaware | 6.60% | $6,600 | Top rate 6.6%. |
| District of Columbia | 9.25% | $9,250 | Progressive — 8.5% to 10.75% across the large-gain range. |
| Florida | 0.00% | $0 | No state income tax. |
| Georgia | 4.99% | $4,990 | Flat 4.99% for 2026 (stepping down). |
| Hawaii | 7.25% | $7,250 | Hawaii's alternative capital-gains rate (vs. up to 11% ordinary). |
| Idaho | 5.30% | $5,300 | Flat 5.3%. |
| Illinois | 4.95% | $4,950 | Flat 4.95%. |
| Indiana | 2.95% | $2,950 | Flat 2.95% for 2026. |
| Iowa | 3.80% | $3,800 | Flat 3.8%. |
| Kansas | 5.58% | $5,580 | Top rate 5.58%. |
| Kentucky | 3.50% | $3,500 | Flat 3.5% for 2026. |
| Louisiana | 3.00% | $3,000 | Flat 3%. |
| Maine | 7.15% | $7,150 | Top 7.15%; +2% surtax on income over $1M starting 2026. |
| Maryland | 5.75% | $5,750 | State rate only — county income tax (~2.3–3.2%) not included. |
| Massachusetts | 5.00% | $5,000 | Flat 5% on long-term gains; +4% surtax on income over ~$1M. |
| Michigan | 4.25% | $4,250 | Flat 4.25%. |
| Minnesota | 9.85% | $9,850 | Top rate 9.85%. |
| Mississippi | 4.00% | $4,000 | Flat 4% for 2026 (stepping down). |
| Missouri | 0.00% | $0 | Missouri exempts individual capital gains starting tax year 2025 — verify with MO DOR. |
| Montana | 4.10% | $4,100 | Reduced long-term-gain rates (top ≈4.1%, cut again for 2026). |
| Nebraska | 4.55% | $4,550 | Top 4.55% for 2026 (stepping to 3.99%). |
| Nevada | 0.00% | $0 | No state income tax. |
| New Hampshire | 0.00% | $0 | No tax — interest & dividends tax repealed in 2025. |
| New Jersey | 6.37% | $6,370 | Typical bracket for large gains; up to 10.75% at very high incomes. |
| New Mexico | 3.54% | $3,540 | 5.9% top rate with a 40% capital-gain deduction. |
| New York | 6.85% | $6,850 | Typical bracket; up to 10.9% top. NYC residents add ~3.9% city tax. |
| North Carolina | 3.99% | $3,990 | Flat 3.99% for 2026. |
| North Dakota | 1.50% | $1,500 | 2.5% top rate with a 40% LTCG exclusion. |
| Ohio | 2.75% | $2,750 | Flat 2.75% for 2026. |
| Oklahoma | 4.50% | $4,500 | Top 4.5% for 2026. |
| Oregon | 9.90% | $9,900 | Top rate 9.9% (reached quickly). Portland-area local taxes not included. |
| Pennsylvania | 3.07% | $3,070 | Flat 3.07%. |
| Rhode Island | 5.99% | $5,990 | Top rate 5.99%. |
| South Carolina | 2.90% | $2,900 | ≈5.2% top rate with a 44% LTCG deduction. |
| South Dakota | 0.00% | $0 | No state income tax. |
| Tennessee | 0.00% | $0 | No state income tax. |
| Texas | 0.00% | $0 | No state income tax. |
| Utah | 4.50% | $4,500 | Flat 4.5%. |
| Vermont | 5.25% | $5,250 | 8.75% top with a 40% exclusion (capped) for assets held 3+ years. |
| Virginia | 5.75% | $5,750 | Nearly flat 5.75% above $17k. |
| Washington | 0.00% | $0 | WA's capital-gains excise tax exempts real estate sales. |
| West Virginia | 4.82% | $4,820 | Top rate 4.82%. |
| Wisconsin | 5.36% | $5,360 | 7.65% top rate with a 30% LTCG exclusion. |
| Wyoming | 0.00% | $0 | No state income tax. |
Rates are planning estimates on a large long-term real-estate gain, not filing figures. Progressive states are shown at the bracket such a gain typically reaches, with the top rate in the note.
States don't split recapture from appreciation. The IRS does.
When you sell a rental federally, the gain is cut into pieces and each piece has its own rate. The part equal to the depreciation you took — or were allowed to take — is unrecaptured Section 1250 gain, taxed at your ordinary rate up to a 25% ceiling. Anything above your original basis is long-term capital gain at 0%, 15% or 20%. The 3.8% net investment income tax can sit on top of both.
State income tax mostly ignores that structure. Nearly every state begins its return from a federal figure — adjusted gross income or taxable income — which already contains the whole gain, and then applies the state's own rate to it. There is no state equivalent of the 25% recapture ceiling and no state version of the 0/15/20 brackets. One rate, applied to everything you recognized.
A handful of states do offer a break, and it is a break on the whole long-term gain rather than on one piece of it: Arizona subtracts 25%, Arkansas half, New Mexico 40%, North Dakota 40%, South Carolina 44%, Vermont 40% on assets held three years or more, and Wisconsin 30%. Montana applies reduced long-term rates, and Hawaii has an alternative capital-gains rate below its ordinary top rate. Those discounts reach the recapture portion as well, because the state never separated it out.
The ones that take nothing
Eight states have no individual income tax at all, so there is nothing for a gain to land in: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas and Wyoming. New Hampshire belongs on that list only recently — it taxed interest and dividends until that levy was repealed in 2025.
Two more reach zero by a different route, and they are the interesting ones:
- Washington has a capital-gains excise tax, and it specifically exempts real estate. Sell stock in Washington and you may owe it. Sell a rental house and you do not.
- Missouri began exempting individual capital gains for tax year 2025. It is the newest entry on this list and the one most worth confirming with the Missouri Department of Revenue before you rely on it.
None of this helps if you live somewhere else. Read on.
If the rental isn't in the state you live in
This is where most people's mental model breaks. Gain from real estate is sourced to where the property sits. That state taxes it, and generally wants a nonresident return, no matter where you were living on the day you closed.
Your resident state then taxes your worldwide income, which includes the same gain, and gives you a credit for the tax you paid to the property's state. The credit normally prevents genuine double taxation — but it is usually capped at what your home state would have charged on that income. In practice the higher of the two rates wins, and moving to a no-tax state does not erase the property state's claim.
Several states also require the closing agent to withhold from a nonresident seller — Maryland and Georgia among them — as a percentage of the price or the gain. That is a prepayment, credited against the real liability when the nonresident return is filed. It is rarely the right number and it is not the final tax.
What these rates are, and what they are not
Each rate in the table is a suggested effective percentage on a large long-term real-estate gain. That framing is deliberate and it has limits worth stating plainly:
- Progressive states are approximated. California, New York, New Jersey and DC are shown at the bracket a large gain typically reaches, not at their top rate. The top rate is in the note. A big enough gain pushes past the figure shown.
- Local income tax is excluded. Maryland's county taxes add roughly 2.3% to 3.2%. New York City adds about 3.9% for residents. Portland-area levies are not here either.
- Resident-state credits are not modelled. The table answers "what does this state take", not "what is my combined bill across two states".
- Nonresident withholding is not a rate. Where it applies it is a cash-flow event at closing, not an addition to the tax.
- Rates change, and several are mid-change. Georgia, Indiana, Kentucky, Mississippi, Nebraska, North Carolina and Ohio are stepping down on published schedules; Maine adds a surtax above $1M from 2026.
The table is generated from the same data file the calculators compute with, so the numbers here and the numbers in your sale estimate cannot disagree. That is enforced by the test suite rather than by anyone remembering.
Put your own numbers through it
A rate is only half the answer. The depreciation recapture calculator runs the actual IRS Schedule D worksheet on your property — recapture, capital gains, NIIT and your state's cut — and shows the check you'd keep.
Open the sale calculator →State tax on rental sales: FAQ
Which states have no capital gains tax on a rental sale?
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas and Wyoming have no individual income tax. Washington's capital-gains excise tax exempts real estate, and Missouri began exempting individual capital gains for tax year 2025. If you live elsewhere, your resident state may still tax the gain.
Do states tax depreciation recapture at 25% like the IRS?
No. The 25% ceiling is federal, and it applies only to unrecaptured §1250 gain. States generally have no separate recapture rate — they tax the whole recognized gain at their ordinary rate. A state that charges 5% charges 5% on the recapture too.
I moved to Texas. Do I still owe tax to the state my rental is in?
Yes. Real-estate gain is sourced to the property's location, so that state taxes it and generally requires a nonresident return. Moving changes what your new resident state adds on top — in Texas, nothing — but it does not remove the property state's claim.
Why is my state's number different from my CPA's?
Probably because this is a single effective rate on a large gain, and your CPA is running your actual brackets, deductions, other income, local tax and any credits. Treat this as a planning figure that gets you to the right order of magnitude, then verify the one that matters.
Does a 1031 exchange defer the state tax as well?
Usually, for states that conform to the federal treatment. Some states claw the deferred gain back if you exchange out of state and later sell — California, Massachusetts, Montana and Oregon operate clawback or tracking regimes. That is a conversation to have with a qualified intermediary and a CPA before closing, not after.
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— Bryan Kelly
I'm a rental property owner, not a CPA or financial advisor. Everything here is my understanding as an investor who has lived it, written to help you ask better questions — verify anything that matters with a licensed professional before acting.