States without capital gains tax: what investors need to know
Written by Jay Beach, SVP, Investor Portfolio Lending · Reviewed by the Mortava lending team · Updated
Eight states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming — impose no state-level tax on individual capital gains, because none of them taxes individual income. That is only half the picture: federal capital gains tax applies in every state, and the details turn on residency, where the property sits, how long you held it, and how the deal is structured. This guide covers the full list, the Washington and Missouri special cases, and the rules that actually determine what a real estate investor owes.
Eight states impose no state-level capital gains tax on individuals: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming — none of them taxes individual income. Federal capital gains tax still applies everywhere, at long-term rates of 0%, 15%, or 20% depending on taxable income, plus a 3.8% net investment income tax for higher earners. Washington taxes large gains on stocks, and Missouri enacted an individual capital gains exemption in 2025.
- Eight states levy no state capital gains tax on individuals: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming.
- Federal capital gains tax always applies regardless of state — long-term rates of 0%, 15%, or 20% by taxable income, plus a possible 3.8% net investment income tax, per the IRS.
- Washington is not on the list: it imposes a capital gains excise tax on large gains from stocks and similar assets, though sales of real estate are exempt from that tax.
- Missouri enacted a 100% individual capital gains deduction in 2025 — a major change worth verifying with a tax professional before you rely on it.
- Living in a no-tax state does not shield gains on property located in a taxing state — the state where the property sits generally gets to tax the sale.
What a state without capital gains tax actually means
A state without capital gains tax means the state adds nothing on top of your federal bill — it does not mean the gain is tax-free. Capital gains are taxed at two levels in the U.S.: the federal level, which applies to every taxpayer in every state, and the state level, which most states impose through their individual income tax.
Most states with an income tax treat capital gains as ordinary income and tax them at the state’s regular rates, sometimes with partial exclusions or deductions. States with no individual income tax simply have no mechanism to tax an individual’s capital gains — which is why the no-income-tax states and the no-capital-gains-tax states are essentially the same list.
For a real estate investor, the state layer can be a meaningful line item on a large gain. But it is the smaller of the two layers, and it only disappears when both you and the property are positioned correctly — a point covered in detail below.
Federal capital gains tax always applies
No state can exempt you from federal capital gains tax. Under IRS rules, gains on assets held more than one year are long-term capital gains, taxed at 0%, 15%, or 20% depending on your taxable income and filing status; the income thresholds for each rate adjust annually, so check the current figures at irs.gov. Gains on assets held one year or less are short-term and taxed at your ordinary income rates.
Higher earners may also owe the 3.8% net investment income tax (NIIT) on capital gains, rental income, and other investment income once modified adjusted gross income exceeds $200,000 for single filers or $250,000 for married couples filing jointly. Those statutory thresholds are not indexed for inflation, so more taxpayers cross them each year.
Rental property owners face one more federal wrinkle: the portion of gain attributable to depreciation deductions — unrecaptured Section 1250 gain — is taxed at a rate of up to 25% rather than the standard long-term rates. On a long-held rental, depreciation recapture is often the largest single piece of the federal bill, and it follows you to Texas, Florida, or anywhere else.
The eight states without capital gains tax
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming impose no state tax on individual capital gains as of this article’s review date. Each arrives at that result the same way — no individual income tax — though a few have relevant history worth knowing.
One practical note: states that skip income tax still fund themselves, usually through property and sales taxes. Texas, for example, leans heavily on property taxes — an annual cost that matters more to a buy-and-hold investor’s cash flow than a capital gains tax that only bites at sale.
- Alaska — no state income tax and no statewide sales tax; some municipalities levy local sales taxes.
- Florida — no individual income tax, and the state constitution prohibits one. A perennial investor migration destination.
- Nevada — no individual or corporate income tax; the state leans on sales and gaming revenue.
- New Hampshire — never taxed wages or capital gains; its separate tax on interest and dividends was phased down and is repealed for tax periods beginning in 2025.
- South Dakota — no individual or corporate income tax, and a popular situs state for trusts partly for that reason.
- Tennessee — no individual income tax since the Hall tax on interest and dividends was fully repealed on January 1, 2021.
- Texas — no individual income tax; the state relies heavily on property taxes instead, so underwrite that annual cost on rentals.
- Wyoming — no individual or corporate income tax, and one of the lightest overall state tax structures for property owners.
State-by-state comparison
The table below summarizes the eight no-tax states and the two special cases every list of states without capital gains tax should flag. Tax law changes — treat this as a snapshot as of the review date and verify current rules with the state revenue department or a tax professional before acting.
| State | State income tax on individuals | State capital gains tax | Notes for investors |
|---|---|---|---|
| Alaska | None | None | No statewide sales tax; some local sales taxes |
| Florida | None | None | Individual income tax constitutionally prohibited |
| Nevada | None | None | No corporate income tax either |
| New Hampshire | None on wages or gains | None | Interest and dividends tax repealed for tax periods beginning in 2025 |
| South Dakota | None | None | No individual or corporate income tax |
| Tennessee | None | None | Hall tax on interest and dividends repealed in 2021 |
| Texas | None | None | Relies heavily on property taxes — budget for them on rentals |
| Wyoming | None | None | No corporate income tax either |
| Washington (special case) | None on wages | Excise tax on large gains from stocks and similar assets | Real estate sales are exempt from the excise tax, but Washington is not a no-capital-gains-tax state |
| Missouri (special case) | Yes | Individual exemption enacted in 2025 | New 100% capital gains deduction for individuals — verify current status |
Washington, New Hampshire, and Missouri: read the fine print
Three states get mislabeled on lists like this one, and the details matter. Washington has no tax on wages, but since 2022 it has imposed a capital gains excise tax on large long-term gains from sales of stocks, bonds, and other financial assets above an inflation-adjusted deduction threshold, per the Washington Department of Revenue. Sales of real estate are specifically exempt from that excise tax — so a Washington landlord selling a rental does not owe it — but Washington does not belong on a list of states without capital gains tax.
New Hampshire never taxed capital gains or wages, but it historically taxed interest and dividends at the state level. That tax was phased down over several years and is repealed for taxable periods beginning after December 31, 2024, per the New Hampshire Department of Revenue Administration — making the state a clean entry on the list going forward.
Missouri is the newest development. In 2025 the state enacted a 100% deduction for capital gains reported by individuals, effectively exempting individual capital gains from Missouri income tax beginning with the 2025 tax year, with a possible future extension to corporations tied to other rate triggers. Missouri still has an individual income tax on other income, so it is a capital-gains exemption rather than a no-income-tax state. Our Missouri capital gains tax guide covers the change in detail — and because the law is new, confirm its current status with a Missouri tax professional before building a plan around it.
What actually determines your capital gains bill
Your state of residence is only one input. Six factors together determine what you owe on a real estate gain, and getting any one of them wrong can produce an expensive surprise.
The property-location rule is the one that catches investors most often. States tax nonresidents on income sourced within their borders, and gain on real estate is sourced to the state where the property sits. A Texas resident selling a California rental generally owes California tax on that gain — and several states enforce this with mandatory withholding at closing on sales by nonresident owners. Moving to Florida changes the tax on your future Florida deals, not on the appreciated property you still own elsewhere.
- Income type — long-term capital gains, short-term gains, depreciation recapture, and ordinary rental income all carry different rates.
- Holding period — more than one year qualifies for long-term federal rates; one year or less is taxed as ordinary income. Flippers usually realize short-term or dealer income, not capital gains.
- Entity structure — LLCs taxed as partnerships or disregarded entities pass gains through to the owners, while C corporations pay tax at the entity level; structure changes who pays and at what rate.
- Residency — your resident state can generally tax all of your income, wherever earned, subject to credits for taxes paid to other states.
- Property location — the state where the real estate sits can tax the gain even if you live in a no-tax state, and may withhold at closing.
- Current law — rates, brackets, exemptions, and thresholds change; Missouri’s 2025 exemption and New Hampshire’s phase-out both happened within the last few years.
How investors typically manage capital gains taxes
State selection is a blunt instrument compared with the federal planning tools investors already use, since the federal layer is the larger one everywhere. Common strategies include holding past the one-year mark to reach long-term rates, harvesting losses against gains, timing sales across tax years, and — for rental property specifically — the Section 1031 like-kind exchange, which defers federal and generally state tax by rolling proceeds into a replacement investment property under strict deadlines.
Primary residences have their own federal break: Section 121 lets qualifying homeowners exclude up to $250,000 of gain ($500,000 for joint filers) on a home they owned and used as a principal residence for at least two of the last five years, per the IRS. It applies to homes, not rentals, though investors sometimes encounter it when converting a property between uses.
None of this is personalized tax advice, and no loan or financing structure eliminates taxes. The right move depends on your full picture — income, entities, states, and timeline — which is exactly what a CPA or tax attorney is for. What financing can do is separate: it determines how efficiently you can buy, hold, and exit the asset that generates the gain in the first place.
Financing rentals in the no-tax states
Tax treatment is one reason investors concentrate in states like Florida, Texas, and Tennessee; landlord-friendly rules, population growth, and no state drag on exit gains compound the appeal. The financing side works the same way in all of them: a DSCR rental loan qualifies on the property’s rent against its payment rather than your personal tax returns, which suits investors whose returns are already structured for tax efficiency.
Mortava lends in all 50 states, including dedicated programs for DSCR loans in Florida, DSCR loans in Texas, DSCR loans in Tennessee, and DSCR loans in Wyoming. Whichever state you buy in, run the rent-versus-payment math first — the DSCR calculator shows in seconds whether a deal covers its debt service.
Where Mortava fits
Mortava is a direct lender for business-purpose loans to real estate investors, lending in all 50 states — including every state on this list. DSCR rental loans qualify on the property’s rent instead of your tax returns, with up to 85% LTV on purchases, 30- and 40-year fixed and interest-only options, loan amounts from $100K to $3.5M, and the ability to close in an LLC or corporation — the entity structures many investors already use for liability and tax planning with their advisors.
Quotes start with a soft credit inquiry, so checking your numbers does not affect your score. Mortava does not provide tax advice — consult a qualified tax professional about capital gains treatment in your situation. Nothing here is a commitment to lend; every loan is subject to full underwriting and approval.
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Frequently asked questions
This article is general education only — not tax, legal, or investment advice. Tax outcomes depend on your income, entity structure, residency, holding period, and current law; confirm your situation with a qualified tax professional. Information was reviewed as of the "last updated" date above and may change.