Does Texas Have a Capital Gains Tax? What Every Investor Should Know in 2025
You might be a little surprised to learn how Texas treats your investment profits. Many people, including you, question, “Does Texas have a capital gains tax?” This concern comes up especially when selling stocks or real estate.
The answer to it is “No, not at the state level.” But there is more to the story.
In this post, we will help you understand how these tax rules impact you in Texas and share ways to plan smarter and pay less in taxes.
How Capital Gains Tax Works at the State Level in Texas
Texas has no state income or capital gains tax
Texas is one of the few U.S. states that doesn’t charge individual income tax. Because of that, it also doesn’t tax capital gains separately. In simple terms, you don’t pay any state-level tax on the profits you earn from selling stocks, real estate (except under federal recapture rules), or other capital assets.
So, when you hear people ask, “Does Texas have a capital gains tax?” many assume they don’t owe anything at all. But that’s not quite true. The state just stays out of it, but the federal tax system still applies to your gains.
In 2025, Texas lawmakers even proposed a constitutional amendment (Proposition 2) to make sure the state can never add a tax on realized or unrealized capital gains. This shows just how deeply rooted the no capital gains tax in Texas policy really is.
What You Are Still Responsible for Under Federal Capital Gains Tax?
Even though the answer to Does Texas have capital gains tax is “no” at the state level, you still have to deal with federal capital gains tax. Let’s take a closer look at how it works for you in 2025.
Short-Term vs. Long-Term Gains
Short-term capital gains apply when you sell an asset you have owned for one year or less. These gains are taxed as regular income, based on your federal tax bracket. This is anywhere from 10% up to 37%, depending on your total taxable income.
Long-term capital gains come from assets you have held for more than a year. These get lower tax rates, like 0%, 15%, or 20%. This is based on your income and filing status.
Additional Taxes, Like NIIT & Depreciation Recapture
Net Investment Income Tax (NIIT) comes in if your modified adjusted gross income (MAGI) goes above $200,000 (single) or $250,000 (married filing jointly). In that case, you will owe an extra 3.8% on your net investment income. This includes your capital gains.
There is another rule to know if you have owned real estate. It is called depreciation recapture. When you sell a property where you have claimed depreciation, a part of your profit gets “recaptured.” That amount is taxed at a higher rate, sometimes up to 25%.
So, while the answer to Does Texas have a capital gains tax is still “no,” you should remember that federal taxes can still impact your profits. It’s important to plan early so these extra taxes don’t take you by surprise.
Key Things You Should Know About Basis, Exclusions, and 1031 Exchanges
Basis, Adjusted Basis, and Calculating Gains
Your cost basis is usually what you paid for an asset, plus any buying costs. You increase that basis if it’s real estate, and you made improvements or added expenses. Your gain is simple. It’s the selling price minus the adjusted basis.
Exclusion for Primary Residence
You can get a big tax break if you sell your primary home and meet the basic rules. You must have spent at least 2 of the last 5 years living in and owning the home.
Section 1031 Like-Kind Exchanges
A 1031 exchange can save on real estate taxes for investment or business. It lets you defer capital gains when you reinvest the money into another similar, or “like-kind,” property. This way, you keep your tax deferral and continue growing your investment.
Capital Losses and Harvesting
You can balance out your gains by using realized capital losses or even carry forward losses from past years. This helps reduce your net capital gain and lowers how much tax you owe.
An Example of How a Texas Investor Might Be Taxed
Let’s look at a simple example.
Say Joseph, who lives in Texas, sells a property. He bought and improved it for $130,000 and later sold it for $170,000. That means his gain is $40,000.
Since he owned the property for more than a year, long-term capital gains rates apply. His total income keeps him in the 15% bracket, so his federal capital gains tax comes out to $6,000.
He doesn’t owe any Texas state capital gains tax. But if his income was higher or if depreciation recapture applied, his total federal tax could increase.
FAQs
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No, Texas does not impose a state-level capital gains tax on stocks, real estate, or other assets.
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No, Texas doesn’t have a state capital gains tax on homes. But you may still owe federal capital gains tax if your profit exceeds IRS limits.
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You can avoid capital gains tax on land in Texas by using a 1031 exchange, installment sale, or donating the land to charity. Always confirm your strategy with a tax expert.
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Yes, if you claimed depreciation, that part can be taxed up to 25%, even without a Texas state gain tax.
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You will pay your regular income tax rate if it’s a short-term gain. For long-term gains, you need to pay about 15%, or roughly $7,500 on $50,000.
Final Thoughts
In short, while Texas doesn’t have its own capital gains tax, you still need to plan for the federal tax side. You can reduce what you owe and keep more of your profit with the right strategies.
At Skyline Financial Management, we make that easier for you. Our team helps you stay ahead with smart tax-saving strategies and full compliance. We guide you whether you are selling a property, handling investments, or need S‑corp tax preparation services.
Let Skyline help you make the most of your gains. Reach out today for expert tax planning and support.
