Which states have no capital gains tax?
Eight states don’t tax individuals on capital gains at all, and a ninth, Washington, leaves real estate out of its capital gains tax. None of the eight now taxes individuals’ income. New Hampshire’s tax on interest and dividends was repealed for periods beginning after December 31, 2024, and Tennessee’s Hall tax on interest and dividends ended in 2021.
No capital gains tax does not mean no state cost. Most of these states charge something when a building changes hands or when an entity owns it.
| State | Tax on an individual’s real estate gain | State costs that can still apply to a sale |
|---|---|---|
| Alaska | None | Recording fees only; no transfer tax |
| Florida | None | Documentary stamp tax of 70 cents per $100 (Miami-Dade differs); 5.5% corporate tax for C corporations |
| Nevada | None | Real property transfer tax, $1.95 per $500 statewide plus county add-ons |
| New Hampshire | None | 7.5% Business Profits Tax on rental businesses; 1.5% transfer tax split by buyer and seller |
| South Dakota | None | Transfer fee of 50 cents per $500 |
| Tennessee | None | 6.5% excise tax on LLC, LP and corporate gains; 37 cents per $100 transfer tax |
| Texas | None | Franchise tax on entity sellers; no transfer tax |
| Washington | None on real estate | Graduated real estate excise tax of 1.1% to 3% plus local rate |
| Wyoming | None | Recording fees only; no transfer tax |
How Washington taxes capital gains but exempts real estate
Washington has a capital gains tax, but land and buildings are exempt from it. The tax is 7% on taxable long-term gains up to $1,000,000 and 9.9% above that, a 2.9% second tier that began with tax year 2025. It applies after a standard deduction that was $278,000 for 2025.
The real estate exemption also covers interests in privately held entities, to the extent the gain comes from real estate the entity owns. So selling your LLC interest in a Spokane apartment building is treated like selling the building. What Washington charges instead is the real estate excise tax on the sale price.
That excise tax is not small. On a $3,000,000 sale in 2026, the graduated state rates come to $59,137.50: 1.1% of the first $525,000, 1.28% of the next $1,000,000 and 2.75% of the last $1,475,000. A 0.5% local rate, common in cities like Seattle and Tacoma, adds $15,000. Because it is figured on the price, a seller with little gain still pays it in full.
One change is coming. In 2026 Washington enacted a 9.9% tax on income over $1,000,000 starting in 2028, and the law faces a court challenge. How it will treat real estate gains is not settled, so a seller planning a 2028 closing should watch it.
Missouri and other states that come close to zero
Missouri is not on the no-tax list because it has an income tax, but since 2025 individuals subtract 100% of the income reported as capital gain on their federal return. For a Missouri building held long term, that leaves only gain the federal return treats as ordinary income, such as Section 1245 recapture from a cost segregation study, taxed at Missouri’s regular rates.
A few other states take only a small bite of a long-term gain. North Dakota’s 40% exclusion leaves an effective rate of about 1.5%, Arkansas taxes half the gain at 3.7%, and Oklahoma lets owners deduct qualifying gain on Oklahoma property held five years. Our capital gains tax by state table compares all fifty.
What you still owe on a sale in a no-tax state
Federal tax applies in full no matter where you live. On a building held more than a year, the gain is split into layers, each with its own rate, and the section 1231 gain rules decide how they net out.
- Long-term capital gain: 0%, 15% or 20% for 2026. The 20% rate starts above $613,700 of taxable income on a joint return and $545,500 single.
- Unrecaptured Section 1250 gain: the straight-line depreciation you claimed on the building, taxed at up to 25%.
- Section 1245 recapture: depreciation on items reclassified by a cost segregation study, taxed at ordinary rates up to 37%.
- Net investment income tax: 3.8% on the gain once modified AGI passes $250,000 joint or $200,000 single, unless you are a real estate professional who materially participates in the rentals.
The building is taxed where it sits
Living in a no-tax state does not protect a gain on a building located in a state with an income tax. States tax nonresidents on income from real property inside their borders, so a Florida resident who sells an apartment building in Oregon owes Oregon tax on the gain, often with money held back at closing.
The reverse is also true. A California resident who sells a building in Texas owes California tax on that gain, because California taxes its residents on income from everywhere, and Texas has no tax to credit against it.
So the full benefit of a no-tax state goes to someone who both lives there and owns property there. Before counting on a move, check the source rules on your state page in the grid below.
Timing a move before a sale
Moving to a no-tax state before you sell helps only with gain your old state can’t source to itself, and only if the move is real before the closing date. A state taxes the gain of the people who are its residents when the gain is recognized, and residency turns largely on domicile, the place you treat as your permanent home.
States look at the whole picture: where your main home is, where you spend your time, where your family lives, where you vote, register your car and keep your doctors. High-tax states audit large gains that follow a recent move. An installment sale that spreads payments over later years can raise its own residency questions, so plan it with your CPA.
1031 exchanges into a no-tax state and clawback states
A 1031 exchange into a building in Texas, Florida or another no-tax state defers the federal tax, and in most states it also ends your old state’s claim once you move. Four states keep a claim on gain deferred from property inside their borders. Their tracking rules follow the gain until the replacement property is sold in a taxable sale.
| State | Clawback rule | What you file |
|---|---|---|
| California | Deferred gain from California property stays taxable by California | Form FTB 3840 every year until the gain is recognized |
| Oregon | Oregon keeps the right to tax deferred Oregon-source gain | Form OR-24 for the exchange year and each year after |
| Montana | Deferred gain stays Montana-source income, taxed when you sell | Montana nonresident return in the year of the taxable sale |
| Massachusetts | Nonresident consents to Massachusetts jurisdiction over the deferred gain | Transferor’s Certification at the original closing |
Worked example: a $1,000,000 gain in California vs Texas
Picture two married couples, each selling an apartment building for a $1,000,000 long-term gain with $150,000 of other taxable income. One couple lives in California and the building is in California. The other lives in Texas and the building is in Texas. Their federal tax is essentially the same.
The Texas couple owes no state tax. California’s 2026 schedules were not posted as of October 2026, so we used the 2025 joint schedule: tax on $150,000 of income is $6,827.28, and tax on $1,150,000 is $107,982.28 including the 1% tax on the $150,000 above $1,000,000. The sale costs the California couple $101,155 in state tax, about 10.1% of the gain.
Now move the Texas couple’s building to California. As nonresidents, they figure tax on all $1,150,000 as if they were residents, then pay the California share, here $1,000,000 of $1,150,000. That comes to about $93,898. Living in Texas saved them roughly $7,257, not the full $101,155.
| Seller | Building location | State tax on the $1,000,000 gain |
|---|---|---|
| Texas residents | Texas | $0 |
| California residents | California | $101,155 |
| Texas residents | California | About $93,898 |
How this works for a 5+ unit apartment building
Apartment buildings are usually held in an LLC or partnership, and that is where no-tax states can still collect. A Tennessee LLC owes 6.5% excise tax on the gain, and family entities rarely escape it, because rent from buildings with more than four units doesn’t count as passive income for the exemption. A Texas LLC can owe franchise tax for the year of sale, and a New Hampshire rental business can owe the Business Profits Tax.
Owners of buildings in several states should also expect a nonresident return in each income-tax state where a building sells. For a large portfolio, the cap rate and NOI may set the price, but the state where each building sits sets the after-tax result.
Selling your apartment building to Skyline
Skyline Capital Investments buys apartment buildings with five or more units in every state, including Texas, Florida, Tennessee and the other no-tax states. We work with 1031 timelines and can offer seller-carry terms when spreading the gain helps.
Send the address and unit count through the form on this page or call (469) 660-2977. We typically respond within 48 hours. Then open your state’s page in the grid below to see exactly what it taxes.
