California has a progressive state capital gain tax rate that ranges from 1% to 13.3% for the tax year 2021. The rate you will pay depends on your taxable income, filing status, and the amount of capital gains you have realized. It’s important to note that California does not conform to the federal capital gain tax rates or rules for all transactions, and the state may have different rules and limitations that apply. Each state may or may not have a state capital gain tax so it is important to understand where you are selling and buying.

Tip: The California clawback provision can potentially impact a taxpayer who completes a 1031 exchange to another state. California Franchise Tax Board will require the investor to file a notice letting them know their taxes have been deferred to another state. If the taxpayer sells that property in the future, and does not execute another 1031 Exchange, California wants their taxes.

Please see the list below from highest to lowest state capital gains taxes.

California: 13.3%
New Jersey: 10.75%
Oregon: 9.9%
Minnesota: 9.85%
Vermont: 8.5%
Maine: 8.5%
District of Columbia: 8.95%
New York: 8.82%
Iowa: 8.53%
Hawaii: 7.25%
South Carolina: 7%
Wisconsin: 7.65%
Arkansas: 6.5%
West Virginia: 6.5%
Louisiana: 6%
Nebraska: 6.84%

Montana: 6.9%
Connecticut: 6.99%
Idaho: 6.925%
Georgia: 5.75%
Maryland: 5.75%
Virginia: 5.75%
Mississippi: 5%
Kentucky: 5%
Kansas: 5%
Ohio: 5%
Oklahoma: 5%
New Mexico: 5.9%
Massachusetts: 5%
North Carolina: 5.25%
Rhode Island: 5.99%
Arizona: 4.5%

Alabama: 5%
Colorado: 4.63%
Utah: 4.95%
Illinois: 4.95%
Michigan: 4.25%
Pennsylvania: 3.07%
Indiana: 3.23%
North Dakota: 2.9%
Delaware: None
Florida: None
Nevada: None
South Dakota: None
Tennessee: None
Texas: None
Washington: None
Wyoming: None

It's important to note that a 1031 exchange can be complex, and it's important to consult with a tax professional and qualified intermediary to ensure that the exchange is conducted properly and in compliance with IRS guidelines.