When an investor sells a property, the federal capital-gains rules are identical no matter which state the property sits in: 0%, 15%, or 20% on a long-term gain depending on taxable income, plus a 3.8% Net Investment Income Tax above certain income thresholds. What is not identical is the state layer sitting on top of that federal bill — and across the 17 states this calculator covers, that layer alone ranges from 0% to 13.3%. For a high-income seller, that is the difference between keeping 76 cents and keeping 63 cents of every dollar of gain.
The federal baseline, the same everywhere
A long-term gain (property held over 12 months) is taxed federally at 0%, 15%, or 20% depending on taxable income, and the 3.8% NIIT applies on top of that for most investors above roughly $200,000–$250,000 in income (the exact threshold depends on filing status). A short-term gain — a flip held under a year — is taxed federally as ordinary income at rates up to 37%, and if the IRS treats the flip as dealer inventory rather than an investment, self-employment tax can apply as well. None of that changes by state. What changes is whether a state adds its own tax on top, and if so, how much.
Five states add nothing at all
Florida, Texas, Nevada, and Tennessee have no state income tax, so a sale in any of them stops at the federal-plus-NIIT layer with nothing added. Washington is the interesting case: the state does have a 7% capital-gains excise tax, but it explicitly carves out real estate — per the Washington Department of Revenue's own FAQ, the tax "does not apply to the sale or exchange of real estate" regardless of how long the property was held, whether it was owner-occupied, or what type of property it is. So for a direct property sale, Washington behaves exactly like the four no-income-tax states, even though it is not one on paper.
Twelve states add a real but moderate layer
| State | Top state rate on the gain | Note |
|---|---|---|
| Arizona | 2.5% | Flat rate. |
| Pennsylvania | 3.07% | Flat; Philadelphia wage/net-profits tax adds more for residents. |
| Ohio | 3.5% | Top bracket; municipalities add 1–2.5% more. |
| Michigan | 4.25% | Flat; Detroit city tax adds 2.4%. |
| North Carolina | 4.25% | Flat rate, declining by statute. |
| Colorado | 4.4% | Flat rate. |
| Illinois | 4.95% | Flat rate. |
| Georgia | 5.39% | Top rate, phasing down in future years. |
| Virginia | 5.75% | Top of a 2%–5.75% progressive bracket; no preferential long-term rate. |
These are all states where ordinary income tax applies to capital gains too — there is no separate, lower state rate for a long-term holding the way the federal system has one. The gap between the cheapest of these (Arizona, 2.5%) and the most expensive (Virginia, 5.75%) is still more than double, but it is a rounding error compared to what happens at the next tier up.
Three states where the state layer dominates the math
New Jersey, New York, and California are a different category entirely. New Jersey taxes gains at ordinary rates topping out at 10.75% above $1,000,000 in income. New York's top rate is 10.9% statewide, and New York City adds up to another 3.876% for residents selling inside the five boroughs. California taxes capital gains as ordinary income at a top combined rate of 13.3% (12.3% top bracket plus a 1% mental health services surtax above $1,000,000) — the highest state-level bite in this comparison by a wide margin.
Putting the two layers together
For a high-income investor with a long-term gain — federal 20% plus the 3.8% NIIT — adding each state's top rate on top produces this spread:
Lower incomes close the gap at the federal level, not the state level
A seller in the lowest federal long-term bracket pays 0% federal and owes no NIIT, so the entire bill in a no-income-tax state can be $0 — but in California it is still 13.3%, because the state applies its own rate regardless of the federal bracket. The percentage-point gap between states does not shrink just because the seller's income is lower; only the federal portion shrinks.
Why this matters more for investors than for one-time sellers
A homeowner selling a primary residence often shelters some or all of the gain under the federal Section 121 exclusion, which caps how much of this state-by-state spread they ever actually pay on. An investor selling a rental, a flip, or a portfolio of properties generally has no such exclusion available on investment property, so the full combined rate in the tables above applies to the whole gain. That is also why the state you choose to hold rental property in, not just the state you choose to buy in, can be worth real money over a multi-year hold — the exit tax is locked in by where the property sits, not by where you live.
A short-term flip changes the federal side of the math (ordinary rates up to 37% instead of the long-term 0/15/20% tiers, plus potential self-employment tax if treated as dealer income) but not the state side — the state's top rate still applies the same way, so the state-by-state spread above holds just as much for a six-month flip as it does for a ten-year hold.