Capital Gains Tax

Capital Gains Tax in Texas: Complete Guide 2026

Updated 2026-03-10

Data Notice: Figures, rates, and statistics cited in this article are based on the most recent available data at time of writing and may reflect projections or prior-year figures. Always verify current numbers with official sources before making financial, medical, or educational decisions.

Capital Gains Tax in Texas: Complete Guide 2026

Tax information is for educational purposes only and does not constitute tax advice. Consult a licensed tax professional for your specific situation.

Texas has no state income tax, which means there is no state-level capital gains tax. Texas residents selling stocks, real estate, crypto, or a business owe only federal capital gains tax. This makes Texas one of the most tax-advantaged states for investors and anyone realizing significant gains from asset sales.

Texas Capital Gains Tax Rates (2026)

Tax LevelRate
Texas state capital gains tax0% (no state income tax)
Federal long-term capital gains0%, 15%, or 20%
Federal short-term capital gains10% — 37% (ordinary income rates)
Net Investment Income Tax (NIIT)3.8% (MAGI over $200K single / $250K MFJ)

Federal Long-Term Capital Gains Brackets (Single Filers)

RateTaxable Income
0%Up to ~$48,350
15%~$48,351 — ~$533,400
20%Over ~$533,400

Combined Rate for Texas Residents

Income LevelFederal RateNIITTexas RateTotal
Below ~$48,3500%—0%0%
~$48,351 — ~$200,00015%—0%15%
~$200,001 — ~$533,40015%3.8%0%18.8%
Over ~$533,40020%3.8%0%23.8%

The maximum combined rate for a Texas resident on long-term capital gains is 23.8% — compared to 37.1% in California and 37.3% for a New York City resident. That difference of 13+ percentage points translates to $130,000+ in savings on a $1 million gain.

How It Works

No State Tax on Any Capital Gains

Texas does not tax income of any kind at the state level. This includes:

  • Short-term capital gains (assets held one year or less)
  • Long-term capital gains (assets held more than one year)
  • Gains from real estate sales
  • Gains from stock and mutual fund sales
  • Cryptocurrency gains
  • Business sale proceeds
  • Gains from collectibles, precious metals, and other assets

The only capital gains taxes Texas residents pay are federal taxes, plus the NIIT if applicable.

Franchise Tax Consideration for Businesses

While Texas has no personal income tax, the state does impose a franchise tax (also called the margin tax) on businesses with total revenue exceeding $2.47 million. This tax applies to the business entity, not to individual capital gains. If you sell a business or business assets, the individual gain is not subject to Texas state tax, but the business entity may owe franchise tax on its final-year revenue.

No Estate or Inheritance Tax

Texas also has no state estate or inheritance tax, which compounds the advantage for investors. Assets inherited by beneficiaries receive a stepped-up cost basis under federal rules, and there is no additional state-level tax on the transfer.

Comparison to National Average

MetricTexasCaliforniaNew YorkNational Avg.
State capital gains rate0%Up to 13.30%Up to 10.90%~4.5%
Max combined rate (LT gains)23.8%~37.1%~37.3% (NYC)~28%—30%
Estate/inheritance taxNoneNoneYes (estate)Varies

Texas provides the most favorable capital gains tax environment among large states. The absence of state-level taxation means Texas residents retain significantly more of their investment returns.

Tips for Maximizing the Texas Advantage

  1. Realize gains while a Texas resident. If you are relocating to Texas from a high-tax state, consider timing the sale of appreciated assets after establishing Texas residency. However, some states (notably California and New York) may still tax gains if the assets appreciated while you were a resident of that state.
  2. Use the 0% federal bracket strategically. If your taxable income (including capital gains) is below ~$48,350 (single) or ~$96,700 (MFJ), your long-term gains are federally tax-free. Retirees and taxpayers in transition years can strategically realize gains in these zero-rate years.
  3. Harvest losses even without state tax. Federal tax-loss harvesting still applies in Texas. Offsetting gains with losses reduces your federal tax obligation. You can deduct up to $3,000 in net losses against ordinary income.
  4. Consider Roth conversions. Converting traditional IRA assets to a Roth IRA while in Texas means paying federal tax on the conversion but no state tax. This is especially advantageous if you might move to a state with income tax in the future.
  5. Donate appreciated assets. Even without state capital gains tax, donating appreciated stock or property to charity avoids the federal capital gains tax on appreciation and provides a fair market value deduction.
  6. Factor in property taxes. While Texas has no income or capital gains tax, property taxes average ~1.60% and can offset some of the savings, particularly for real estate investors who hold property in Texas.
  7. Track your former state’s rules. If you recently moved to Texas, verify that your previous state will not assert tax authority over gains from assets that appreciated during your residency there.

Key Takeaways

  • Texas imposes no state capital gains tax of any kind — the maximum combined rate for long-term gains is the federal 23.8%
  • This represents a savings of 10%—14% compared to California, New York, and other high-tax states on the same gain
  • Texas also has no estate or inheritance tax, compounding the benefit for investors
  • The franchise tax applies to business entities but not to individual capital gains
  • Timing asset sales after establishing Texas residency can produce significant tax savings, but former-state clawback rules may apply
  • Even without state tax, federal strategies like loss harvesting, the 0% bracket, and charitable giving remain valuable

Next Steps