States that don’t tax capital gains, dividends or investment income

If you are wondering which states do not tax capital gains, dividends or investment income, they are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas and Wyoming. That’s because none of these states levy a broad-based personal income tax.

Interestingly, Missouri is currently the only U.S. state with a personal income tax that doesn’t tax long- or short-term capital gains. New Hampshire previously taxed interest and dividends, but the tax was repealed for tax periods beginning on or after January 1, 2025.

This all matters because investors with significant capital gains or dividend income may be able to keep more of their earnings if they live in one of these states. If you’re considering which state to live in, though, it’s important to weigh other factors like property taxes, sales taxes and cost of living alongside any potential reduction in state taxes on your investment income.

Capital gains, dividends and investment income

Capital gains generally occur when you sell a capital asset, such as a stock or mutual fund, for more than what you bought it for (known as your basis). If you sell an asset, the difference between the amount you receive and your basis is a capital gain or loss.

At the federal level, long-term capital gains (for assets held for more than one year) may be taxed at a lower rate, while, under current law, short-term capital gains (for assets held for one year or less) are generally taxed at ordinary income rates.

Currently, long-term capital gains are taxed at the federal level at 0%, 15% or 20% depending on your level of income (though there are some exceptions where higher rates may apply). Meanwhile, federal short-term capital gains rates can range between 10% and 37%, depending on your tax bracket. An additional 3.8% net investment income tax may also apply for certain higher-income earners.

Dividends are generally included in taxable income and must be reported on the investor’s federal tax return. Generally, your dividends are required to be reported by the company paying the dividend and/or your broker using Form 1099-DIV, which is required to be filed with the IRS as well as provided to you.

Dividends are classified as either qualified or non-qualified. At the federal level, qualified dividends are currently taxed at the same rates as the long-term capital gains tax rates of 0%, 15% or 20%. Non-qualified dividends are taxed at the same rates as ordinary income (10% to 37%, depending on your tax bracket).

State taxes are a separate layer. Some states tax capital gains and dividends through their regular income tax systems, which can further reduce what investors keep after federal taxes. Other states tax capital gains and dividends at lower rates.

Considerations for investors

Living in a state that doesn’t tax investment income can help you keep more of your taxable capital gains, dividends and interest income. That could be meaningful depending on your situation, such as if you are a retiree drawing from your taxable brokerage accounts, an investor realizing large gains, or a member of a household with meaningful dividend and interest income.

State income tax is only one part of the picture, however. States without broad-based individual income taxes may rely more heavily on other revenue sources, including sales or property taxes.

Sales tax data for 2026 shows that four of the nine states with no capital gains tax have higher combined state and average local sales tax rates:

Meanwhile, the nationwide population-weighted average combined sales tax is roughly 7.53%.

At the same time, property tax data shows that two of the nine states with no capital gains tax have higher-than-average property tax rates:

Comparatively, the national average property tax rate is roughly 1%.

Just like with federal taxes, the type of account where your assets are held may have a significant effect on state taxes. Many states follow the federal rules for tax-advantaged accounts like IRAs and 401(k)s, allowing you to defer state taxes on your investment income or even take qualified Roth distributions without any state tax liability in many cases, depending on your state and situation. By contrast, depending on your state, gains from assets held in a taxable brokerage account can increase your state tax bill.

There are also some tax-planning strategies that may be useful no matter which state you live in. These include considering your account type, investment type and holding period, as well as potentially taking advantage of tax-loss harvesting. These strategies could potentially help you manage your timing and level of taxable income in any given year, subject to various limitations, such as the “wash sale” rules.

Considerations for living in a state that does not tax capital gains, dividends or investment income

Living in a state with no tax on capital gains, dividends and investment income could save money for some investors, especially those with large taxable portfolios or plans to sell highly appreciated assets. But the decision is a highly personal one. The potential tax savings should be weighed against housing costs, insurance, healthcare access, family needs and potential lifestyle trade-offs. And it’s wise to discuss your plans with a tax professional.

Residency rules also matter. Simply spending part of the year in another state may not be enough to change your tax status. States can look into where you own a home, where you are registered to vote, where you work and where you spend your time. Many states consider the number of days spent in the state – often including a 183-day threshold – alongside domicile factors such as home ownership, voter registration, work location and family ties. Rules vary by state.

For many households, living in a particular state for tax reasons may not make sense. But if you are considering which state to live in, state investment income taxes could be part of the comparison before you decide.

The bottom line

The eight states that do not tax capital gains, dividends or other investment income are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas and Wyoming. Missouri does not tax capital gains, but it does tax dividends and certain kinds of other investment income. State tax policy can affect after-tax returns, but it shouldn’t be the only factor in an investment decision or when deciding where to live. You may want to evaluate federal taxes, state taxes, cost of living and goals, and discuss your situation with a tax and financial professional, before making any major life changes.

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