Capital Gains Tax by State (2026) — and Why Your State Rate Decides How Much a §453 Sale Saves
The federal capital-gains rate is the same wherever you live. Your state rate is what changes the size of the check — and for most states, there's a surprise: no special capital-gains rate at all. The large majority tax a capital gain exactly like a paycheck — as ordinary income, at the top marginal rate. So the higher your state's income tax, the more a structured installment sale (which spreads the gain across years) is worth.
Buyer cash → Assignment Co. → A-rated carrier → You, on schedule
The three kinds of states
1. States that tax gains as ordinary income (most of them). No 0%/15% break — the gain stacks onto your income and pays the state's top marginal rate. These are where a §453 structured sale moves the needle most:
2. Nine states with no state tax on the gain at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Here the §453 benefit is federal only — still real (keeps you in lower federal brackets year to year, preserves deductions), just smaller.
3. Washington — the special case. No income tax, but a 7% excise on long-term capital gains above roughly $262,000 (2026, inflation-adjusted). It excludes real estate, retirement accounts, and certain small-business sales — so a home or rental sale escapes it, but a business or securities sale over the threshold does not.
(A dozen states — including Arizona, Arkansas, Montana, New Mexico, North Dakota, South Carolina, and Wisconsin — offer a partial capital-gains deduction or exclusion that lowers the effective rate below their top marginal rate. Confirm your state's exact treatment with your CPA.)
Why this matters for a structured sale
A §453 structured installment sale defers the federal gain identically in all 50 states. What differs is the state layer — and because most states tax the gain as ordinary income, spreading it across years also keeps each year in a lower state bracket, not just a lower federal one. The math:
- High-tax state (CA, NY, NJ, HI, OR, MN, MA): biggest win. You're deferring both a 20% federal + 3.8% NIIT layer and a 9–13.3% state layer, and the state layer often drops a bracket or two when spread.
- No-tax state (TX, FL, NV, WA-real-estate, etc.): federal-only win — still worth a look on larger deals, but the state savings aren't there.
For a state-specific breakdown, see the California capital-gains breakdown — the same logic applies to any state, scaled to its rate.
Frequently asked
Which states have no capital gains tax? Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming have no tax on capital gains as income — though Washington imposes a separate 7% excise on long-term gains over ~$262,000 (excluding real estate and retirement accounts).
Do most states give capital gains a lower rate like the federal 0/15/20%? No. Most states have no preferential capital-gains rate — they tax the gain as ordinary income at the same brackets that apply to wages. California is the highest at 13.3%.
Does a structured installment sale work in my state? Yes — the federal §453 deferral works in all 50 states. Your state's rate only determines how much extra you save on the state layer on top of the federal deferral.
Every state's deferral page
Find your state's specific capital-gains and §453 breakdown:
Alabama · Alaska · Arizona · Arkansas · Colorado · Connecticut · Washington DC · Delaware · Florida · Georgia · Hawaii · Idaho · Illinois · Indiana · Iowa · Kansas · Kentucky · Louisiana · Maine · Maryland · Massachusetts · Michigan · Minnesota · Mississippi · Missouri · Montana · Nebraska · Nevada · New Hampshire · New Jersey · New Mexico · New York · North Carolina · North Dakota · Ohio · Oklahoma · Oregon · Pennsylvania · Rhode Island · South Carolina · South Dakota · Tennessee · Texas · Utah · Vermont · Virginia · Washington · West Virginia · Wisconsin · Wyoming
📘 Get the free Seller's Guide to §453 + a fit-check
A plain-English guide for sellers: how a structured installment sale defers the tax when you sell a business, practice, or property — the math, the alternatives, and how to know if your deal fits.
Drop your info — instant PDF download + within 1 business day Hans will email a preliminary read on which structure fits your deal. No retainer. Carrier compensates the broker — not you.
📞 Hans Goldstein · 317-463-6659 · CA Insurance License #4322192 · Independent §453 specialist · Goldstein & Co. LLC
Illustrative only — not tax, legal, or accounting advice. 2026 figures; state rates, thresholds, and capital-gains deductions change and vary by situation. Confirm your state's current treatment with your CPA.
Run your specific numbers
The calculator runs your sale through real 2026 federal + state tax brackets and shows §453 savings vs lump sum side-by-side.
Run the calculator → 317-463-6659