24 Responses to “Capital Gains Tax Rates - State by State”

1. rob on Nov 3rd, 2007 at 7:33 pm

   what about the alternative minimum tax?

2. Jim on Dec 7th, 2007 at 7:11 pm

   Massachusetts Tax Rate is 5.3%, not 5.6%.

   You can also choose to pay optional rate of 5.85% if you like.

3. mauch on Dec 11th, 2007 at 7:49 pm

   Hey Jim,

   Thanks for the update… states laws change so much… it is tough to keep up on the capital gains tax rates.

   So, for everyone out there living in… or with property in Mass… the capital gains tax rate is 5.3%.

   Thanks again Jim!

   Cheers,

   Trevor
   The REI Brain

4. Shaggy on Feb 17th, 2008 at 9:43 am

   I’m not sure I understand the long-term capital gain rates shown in your table of states.

   According to this url (http://taxes.about.com/od/capitalgains/a/CapitalGainsTax_4.htm) most states do not have separate capital gains tax rates. Instead, most state will tax your capital gains as ordinary income subject to the state income taxes rates.

5. mauch on Feb 17th, 2008 at 6:16 pm

   Hey Shaggy,

   Yep, you’re right about that. This table shows the high state income tax rate for the states that tax capital gains as ordinary income.

   This chart shows you what you can expect to pay in taxes on your capital gains for each state. So, if the state taxes capital gains as ordinary income… the chart shows the high ordinary income tax rate for that state.

   Keep in mind, I compiled these mid-2007… so be sure to verify with your state before you take this for gospel. If you see any discrepency… let me know.

   Thanks,

   - Trevor

6. Shaggy on Feb 18th, 2008 at 5:15 am

   Thank you for the reply, Trevor. So if I understand things, there is no separate capital gains tax for most states, it’s just whatever the regular state tax rate is and you don’t even need to know that rate since it is built into the tax guide’s tax table.

   What about the Consumers Use Tax for Internet purchases that my state keeps trying to make its citizens pay, didn’t Congress explicitly say no taxes on the Internet? Thanks Again.

7. Trevor on Feb 19th, 2008 at 4:56 pm

   Hey Shaggy,

   Yep. Most states just tax capital gains as ordinary income… so whatever ordinary income tax bracket you land in that year… that’s what you’re paying.

   As for Consumers Use Tax… no clue about that. I do know that there are some laws that don’t tax digital goods… but do tax hard goods that are shipped.

   Anyhow, I hope that helped!

   - Trevor
   The REI Brain

8. Joe on Mar 20th, 2008 at 11:13 am

   When making a land sale in arizona but live in illinois which state do you pay capital gains in I was imformed by Arizona state tax office there is no capital gains tax in that state. THANKS Joe

9. mauch on Mar 20th, 2008 at 12:23 pm

   Hey Joe,

   Thanks for the question man! Man… this one isn’t cut and dry… Arizona doesn’t have a “state capital gains tax”, but they do tax residence at their ordinary income tax rate on capital gains… so in other words… they don’t have a special “capital gains tax rate”… but instead just tax capital gains as ordinary income.

   Since you live in Illinois… you’ll have to check w/ them on their capital gains laws. It can get confusing if you live in one state and sell property in another… cause all states have their own unique laws.

   So, get a hold of the Illinois tax department and run the situation by them… I’m telling you right now that you won’t get out of paying state tax on that capital gains… it just might not be called a “capital gains tax”… but it will probably be included in w/ your ordinary income.

   I’m not a CPA… so don’t take this as tax advice… give your CPA a call and give the state of Illinois a call to see what they think.

   Sorry I wasn’t able to completely answer your question… but I hope I was able to help a bit!

   Cheers,

   - Trevor

10. Joe on Mar 20th, 2008 at 4:00 pm

    YES I CHECKED WITH ARIZONA AND THEY SAID IT WOULD BE TAXED AS NON RESIDENT INCOME IN THAT STATE I WILL CHECK AND SEE WHAT THE DEAL IS IN ILLINOIS LUCKILY I AM RETIRED AT AGE 52 AND ON A PENSION IN ILLINOIS ONE OF THE FEW STATES WITCH HAVE NO TAX OR AGE RESTRICTIONS ON PENSIONS OR SOCIAL SECURITY SO AT LEAST IM GETTING A GOOD DEAL THAT WAY. THANKS JOE

11. Rachel on Mar 30th, 2008 at 2:22 pm

    I live in TX (no cap gains tax or income tax) and will receive money from a land sale in UT. Will I have to pay capital gains to UT?

    Rachel

12. Trevor on Apr 1st, 2008 at 12:49 pm

    Hey Rachel,

    I’m so sorry about the delay in getting back to you… was out of town for a wedding and just got to checking my email this morning.

    Okay…. really I couldn’t answer this one for you. Each state has their own laws… so you might check with Texas and Utah to see what their stance is on taxing sales like that.

    In my experience… if you have income… a state will always try to get their hands into your pockets… so do your research and I wouldn’t be surprised if you do have to pay some type of tax at the state level for the profit you made on your sale.

    Hey, if you would… can you post the answer you find here on this page? That would help out the rest of the community a ton!

    I’m not a CPA… so I apologize about not being able to give you a great answer.

    Hope that helped a bit.

    Cheers,

    - Trevor

13. Dani on Apr 16th, 2008 at 8:33 am

    Hi, I’m paying 12% in MA on Capital Short Term Gains. Can that be right? I couldn’t believe it. My K-1 income is taxed at 12% just Massachusetts!

14. Trevor on Apr 16th, 2008 at 8:47 am

    Hey Dani,

    Hmmm… I really don’t know a whole lot about Massachusetts tax law. Of course, short term capital gains are taxed differently than long-term capital gains.

    For federal capital gains tax, short term capital gains are taxed 100% as ordinary income… not at the capital gains tax rate. As for Massachusetts… I really couldn’t tell you what the 12% rate is all about.

    Keep in mind, since you owned the property for less than 12 months (which is the definition of a short-term capital gain)… you don’t get the favorable long-term capital gains tax treatment. So… if you want the lower tax, be sure to hold the property for longer than 12 months.

    But… as for whether the 12% tax is accurate… I truly don’t know enough about Massachusetts to give you a solid answer.

    Thanks for the comment!

    - Trevor

15. Dani on Apr 16th, 2008 at 8:55 am

    Thanks responding so quickly.
    Turbo Tax and others have stated there is a 12% MA short-term Cap Gains

16. Trevor on Apr 16th, 2008 at 8:59 am

    Hey Dani,

    No prob. That must be the case then… aren’t those short-term capital gains a killer?

    Thanks again!

    - Trevor

17. Liz on Apr 16th, 2008 at 9:34 am

    I live in MA too.

    it makes me want to move to a income tax free state really quickly!!

    First of all Income Tax should be indexed to the CPI, Secondly I don’t see how the government (federal and state) has the authority to impose income taxes.

    If you look at the highest marginal tax rate throughout history it makes you wonder what really caused the great depression to stay that way for so long. Its much like today. We are entering a recession and instead of cutting taxes, everyone of the Dem’s want to increase taxes, for the rich of course. I don’t think you can make it with 2 kids living near Boston and not be “Rich”. http://en.wikipedia.org/wiki/Income_tax_in_the_United_States The only reason why we got out of the depression was because all manufacturing was destroyed all over the world from WWII, except for the USA. And we had an amazing run.

    Even with the housing bust, its very expensive to live a “Simple life”. And inflation is eating up all my savings.

    The best way to lift an economy is to lower spending and cut taxes, which in turn makes us more competitive and more attractive for foreign investment. Tell the fed to stop flooding the market with dollars and convince all government to cut back spending!!

18. Trevor on Apr 16th, 2008 at 9:48 am

    Great insight Liz.

    The Dems do enjoy their taxes. As difficult as it is… a whole lot of problems would be curbed if the government (national, local, and state) were all run like businesses… where efficiency, productivity, and results were a priority.

    Right now is a weird time in the economy because the Fed is trying to “help” out the economy by making money a bit more available… but, that really isn’t helping out the real estate market because… while interest rates are down… people still can’t get loans because of the very tight lending requirements (and lack of loan programs) of today.

    Hmmm… I really couldn’t say what the answer is for the entire economy… I’ll just have to do what I know. No matter what type of economy there is (even the great depression), savvy business people and entrepreneurs still make as much… if not more money than in good/decent economies.

    It’s all in the way we look at things I guess.

    Liz, thanks again for your insight and I agree that the government needs to cut back spending in a big way.

    Thanks!

19. M. Dawes on May 2nd, 2008 at 3:32 pm

    We’ve had our first house in Omaha, Nebraska since 1975 and paid $19,000 for it; we lived in it till 1997. In 1997 my husband got a job with the city where we had to live in a city residence in a city park. We have rented out our house since 1997 because of this job stipulation. We lived at the city residence until 11/2006 when the city eliminated his job. We bought a new house for $170,000 and moved to this in 11/2006, continuing to rent out our first house. We now want to sell our first house to our daughter for $94,000, paying about $4,000 in closing costs as well as 10% gift equity for the down payment. We’ve put siding, heating/AC system, carpeting, three roofs, and other improvements, etc., on this first house over the years. We still owe $73,000 on this first house, due to refinancing for the down payment for the new one. My question is, what am I looking at for capital gains, ball park figure? And, how can I minimize what we will have to pay? We have never sold a house before and this will be our first experience with capital gains. Thank you!

    Marta

20. FD-Condo-Hotel-South-Beach on May 6th, 2008 at 7:01 pm

    In Florida, an individual owning real estate or a couple owning real estate where they lived for 2 years in a period of 5 years can deduct $250,000 for a single person and $500,000 for a couple from their capital gains.
    Check with an accountant for more information.
    Best regards.
    FD @ Condo Hotel South Beach

21. Sasha on Jul 9th, 2008 at 3:56 pm

    I own a house in Myrtle Beach SC. I purchased the house in July 2004. I lived in the house for 2 years (July 04-June 06). Due to marriage I moved to Alabama and changed jobs as well. I could not sell my house. I currently have it rented and I profit $400 above my mortgage payment including tax and insurance. I understand that since it was my primary residence, I will not have to pay capital gains taxes as long as I sell it by July 2009. However, the market is terrible right now. I paid 130K for the home and I have it listed now for 169K, but we have not received any offers. Would it be wise to keep renting it for a few more years and let my 60 month period run out or should I lower my price real low and sell it? What are the pros and cons from a tax standpoint?

22. Trevor Mauch on Jul 11th, 2008 at 11:17 am

    Hey Sasha,

    Thanks for the comment!

    Well… the answer here is… It Depends. ;-).

    First off, I’m not a CPA so be sure to get your own tax counsel to help ya out before you make a decision.

    Well… for me, I would make a decision based on what else I would do w/ the money I earned if I were to sell the property while the capital gains tax exemption is still in effect.

    Basically… what the heck will you do w/ the money if you sell it this year?

    Let’s say you sell it for 169k. Is there a mortgage on the property (I think you said there was)? That of course will have to be paid off, any realtor fees will have to be paid (usually 3-6%… which would be at least $5k), any closing costs (figure a few hundred to a few thousand)…

    That might leave you with $25k-$30k (maybe less) after the sale is all said and done… that is… if you sell it for 169k.

    What would you do with that money after you sold? The stock market isn’t all that safe for the average investor… money markets and CD’s are earning 2-4%…

    Let’s say you put the $30k into something earning a guaranteed 4% (conservative, but realistic)… that would pump out about $1,200 a year in interest.

    Right now, with your rental property you are earning $400/month in positive cashflow which of course works out to be $4,800 a year (not including repairs and maintenance expenses I’m sure)… which is way better than the $1,200.

    Also, yes… the real estate market is in a slump… but unless you have to sell right now… I’d hold onto the property since it’s cashflowing.

    The market WILL come back… it always does. By that time the property should be worth more… you’ll have banked the $400/month in cashflows… and you’ll have awesome tax writeoffs the whole time.

    For me, I’d hold onto it unless you had another investment to put the cash into that would pump out a better return… good luck finding one that is secure as your real estate.

    Anyhow, pros of selling now of course is that you save the about $10,000 in capital gains taxes w/ the exemption.

    Cons are that you lose your tax write offs, you lose the “free” $400 a month in cash flow, you lose any chance to take advantage of the appreciation once the real estate market improves in a few years.

    If it were me, I’d hold onto the property… it doesn’t make sense to sell a property that is producing monthy income and writeoffs just so you can save $10k in taxes.

    I hope that gave you a bit to think about… but as I said… check w/ your CPA to make sure of any tax specifics.

    Chat soon,

    - Trevor

23. Trackback: Carnival of Real Estate- 64th Edition | Carnival of Real Estate - Real Estate Blogging Tips and Tricks
    Oct 24th, 2007 at 1:52 pm

    [...] mauch of REIBrain writes Capital Gains Tax Rates- State by State [...]

24. Trackback: Kapowich pleased to be included in Lani Anglin's "Carnival of Real Estate" #64
    Oct 24th, 2007 at 7:13 pm

    [...] mauch of REIBrain writes Capital Gains Tax Rates- State by State [...]

Leave a Reply