How High are Capital Gains Tax Rates in Your State?

February 20, 2014

Kyle Pomerleau

Kyle Pomerleau,

Currently, the United States places a high tax burden on capital gains income. The current federal top marginal tax rate on long-term capital gains in the United States is 23.8 percent (20 percent top rate plus 3.8 percent tax on unearned income to fund the Affordable Care Act). In addition, taxpayers have to pay state and local income taxes on their capital gains income from zero percent in states that do no levy an individual income tax to as high as 13.3 percent in California.

Taking into account the state deductibility of federal taxes, local income taxes, the phase-out of itemized deduction, and any special treatment of capital gains income, this map shows the combined federal, state and local top marginal tax rate on capital gains by state.

The state with the highest top marginal capital gains tax rate is California (33 percent), followed by New York (31.5 percent), Oregon (31 percent) and Minnesota (30.9 percent).

The nine states with no personal income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming) have the lowest rate in the United States (25 percent).

The average across all states is 28.7 percent.

It is also worth noting that every U.S. state has a top marginal capital gains tax rate higher than the average of the 34 member countries of the Organization for Economic Cooperation and Development (OECD) of 18.2 percent.

For more information see: Fiscal Fact No. 414: The High Burden of State and Federal Capital Gains Tax Rates

Click on the map to enlarge it. View previous maps Tax Foundation.

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A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.

Itemized deductions allow individuals to subtract designated expenses from their taxable income and can be claimed in lieu of the standard deduction. Itemized deductions include those for state and local taxes, charitable contributions, and mortgage interest. An estimated 13.7 percent of filers itemized in 2019, most being high-income taxpayers. 

An individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S.

A capital gains tax is levied on the profit made from selling an asset and is often in addition to corporate income taxes, frequently resulting in double taxation. Capital gains taxes create a bias against saving, leading to a lower level of national income by encouraging present consumption over investment.

The marginal tax rate is the amount of additional tax paid for every additional dollar earned as income. The average tax rate is the total tax paid divided by total income earned. A 10 percent marginal tax rate means that 10 cents of every next dollar earned would be taken as tax.