State Tax on Investment Income — 50-State Guide (2026)
Direct answer
Nine states have no state tax on investment income at all (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming — though Washington taxes long-term capital gains above $270,000 at 7%). In the other states, investment income is taxed as ordinary income, from a 3.07% flat rate (Pennsylvania) up to California's 13.3% top rate. A $10,000 long-term capital gain therefore costs from $0 to about $1,330 in state tax depending on where you live.
The table below shows how each state treats investment income in 2026 and the estimated state tax on a $10,000 long-term capital gain (single filer, federal tax excluded). Rates reflect the Tax Foundation — State Individual Income Tax Rates and Brackets, 2026 (2026-08-11). Graduated-state figures use the top marginal rate and overstate real liability.
| State | Treatment | State tax on $10k LT gain |
|---|---|---|
| Alaska | No state tax on investment income | $0 |
| Florida | No state tax on investment income | $0 |
| Nevada | No state tax on investment income | $0 |
| New Hampshire | No state tax on investment income | $0 |
| South Dakota | No state tax on investment income | $0 |
| Tennessee | No state tax on investment income | $0 |
| Texas | No state tax on investment income | $0 |
| Wyoming | No state tax on investment income | $0 |
| Washington | 7% tax on long-term capital gains over $270,000 | $0 |
| Arizona | Taxed as ordinary income at a flat 2.50% | $250 |
| Colorado | Taxed as ordinary income at a flat 4.40% | $440 |
| Georgia | Taxed as ordinary income at a flat 4.99% | $499 |
| Idaho | Taxed as ordinary income at a flat 5.30% | $530 |
| Illinois | Taxed as ordinary income at a flat 4.95% | $495 |
| Indiana | Taxed as ordinary income at a flat 2.95% | $295 |
| Iowa | Taxed as ordinary income at a flat 3.80% | $380 |
| Kentucky | Taxed as ordinary income at a flat 3.50% | $350 |
| Louisiana | Taxed as ordinary income at a flat 3.00% | $300 |
| Massachusetts | Taxed as ordinary income at a flat 5.00% | $500 |
| Michigan | Taxed as ordinary income at a flat 4.25% | $425 |
| Mississippi | Taxed as ordinary income at a flat 4.00% | $400 |
| North Carolina | Taxed as ordinary income at a flat 3.99% | $399 |
| Pennsylvania | Taxed as ordinary income at a flat 3.07% | $307 |
| Utah | Taxed as ordinary income at a flat 4.50% | $450 |
| Alabama | Taxed as ordinary income (top marginal 5.00%) | $500 * |
| Arkansas | Taxed as ordinary income (top marginal 3.90%) | $390 * |
| California | Taxed as ordinary income (top marginal 13.30%) | $1,330 * |
| Connecticut | Taxed as ordinary income (top marginal 6.99%) | $699 * |
| Delaware | Taxed as ordinary income (top marginal 6.60%) | $660 * |
| District of Columbia | Taxed as ordinary income (top marginal 10.75%) | $1,075 * |
| Hawaii | Taxed as ordinary income (top marginal 11.00%) | $1,100 * |
| Kansas | Taxed as ordinary income (top marginal 5.58%) | $558 * |
| Maine | Taxed as ordinary income (top marginal 7.15%) | $715 * |
| Maryland | Taxed as ordinary income (top marginal 5.75%) | $575 * |
| Minnesota | Taxed as ordinary income (top marginal 9.85%) | $985 * |
| Missouri | Taxed as ordinary income (top marginal 4.70%) | $470 * |
| Montana | Taxed as ordinary income (top marginal 5.65%) | $565 * |
| Nebraska | Taxed as ordinary income (top marginal 4.55%) | $455 * |
| North Dakota | Taxed as ordinary income (top marginal 2.50%) | $250 * |
| New Mexico | Taxed as ordinary income (top marginal 5.90%) | $590 * |
| New York | Taxed as ordinary income (top marginal 10.90%) | $1,090 * |
| New Jersey | Taxed as ordinary income (top marginal 10.75%) | $1,075 * |
| Oklahoma | Taxed as ordinary income (top marginal 4.50%) | $450 * |
| Oregon | Taxed as ordinary income (top marginal 9.90%) | $990 * |
| Rhode Island | Taxed as ordinary income (top marginal 5.99%) | $599 * |
| South Carolina | Taxed as ordinary income (top marginal 6.00%) | $600 * |
| Vermont | Taxed as ordinary income (top marginal 8.75%) | $875 * |
| Virginia | Taxed as ordinary income (top marginal 5.75%) | $575 * |
| West Virginia | Taxed as ordinary income (top marginal 4.82%) | $482 * |
| Wisconsin | Taxed as ordinary income (top marginal 7.65%) | $765 * |
* Graduated-state estimate uses the top marginal rate and overstates real liability; actual tax is lower because lower brackets are taxed at lower rates.
Why this matters for compounding
Where you live changes how much of your investment growth you keep. In a no-tax state, the full compounded return stays yours. In a high-tax state, a portion of every gain flows to the state treasury each year — and because compounding is exponential, that drag compounds too.
Use the Compound Interest Calculator to model growth after a state tax drag, or read our guide on the tax implications of compound interest in 2026.
Source: Tax Foundation — State Individual Income Tax Rates and Brackets, 2026 (https://taxfoundation.org/data/all/state/state-income-tax-rates-2026, retrieved 2026-08-11).
Educational only — not tax advice. State rates change yearly; confirm with your state revenue department or a qualified tax professional. Content reviewed for accuracy by Priya Nair, CFP®.