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State Capital Gain Taxes on Stocks
Old 04-17-2014, 02:26 PM   #1
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State Capital Gain Taxes on Stocks

Most of my income is ordinary and while looking at long-term strategies to shift income to other sources I noticed that federal capital gains taxes in the US is 15% except if in the highest marginal tax bracket, but most states seem to have capital gains taxes as well:

The High Burden of State and Federal Capital Gains Tax Rates | Tax Foundation

So if I was living in a 6% state, I would effectively have to pay 21% on capital gains? Is the tax dependent on where I am a resident or where my brokerage account is located? I am planning on shifting my earnings from W2 to long-term stock investments and don't know what my holding periods will be, but is it a strategy to consider moving to another state at some point to minimize the capital gains tax?

Most of Warren Buffett's taxes must be from capital gains, wouldn't he stand to make a huge amount more if he moved his company from Nebraska?
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Old 04-17-2014, 03:05 PM   #2
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Depends on the state in which you live (or earned money in if you travel for business).

Yep, add the state tax to the federal tax. I'm sure they're all different.
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Old 04-17-2014, 03:20 PM   #3
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Originally Posted by inquisitive View Post
Most of my income is ordinary and while looking at long-term strategies to shift income to other sources I noticed that federal capital gains taxes in the US is 15% except if in the highest marginal tax bracket, but most states seem to have capital gains taxes as well:

The High Burden of State and Federal Capital Gains Tax Rates | Tax Foundation

So if I was living in a 6% state, I would effectively have to pay 21% on capital gains? Is the tax dependent on where I am a resident or where my brokerage account is located? I am planning on shifting my earnings from W2 to long-term stock investments and don't know what my holding periods will be, but is it a strategy to consider moving to another state at some point to minimize the capital gains tax?

Most of Warren Buffett's taxes must be from capital gains, wouldn't he stand to make a huge amount more if he moved his company from Nebraska?
Its simple move to one of the states that does not have an income tax, Alaska, Nevada, Florida, South Dakota, Texas, Wyoming, and Washington, and dividends only are taxed in Tennesee and New Hampshire.
So that does give you a fairly large choice of climate, cold,or hot, wet or dry, flat or mountain scenery.
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Old 04-17-2014, 05:09 PM   #4
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.....So if I was living in a 6% state, I would effectively have to pay 21% on capital gains? Is the tax dependent on where I am a resident or where my brokerage account is located? I am planning on shifting my earnings from W2 to long-term stock investments and don't know what my holding periods will be, but is it a strategy to consider moving to another state at some point to minimize the capital gains tax?

Most of Warren Buffett's taxes must be from capital gains, wouldn't he stand to make a huge amount more if he moved his company from Nebraska?
It would likely be a little less than 21% because the 6% of state taxes would be deductible for federal tax purposes and would slightly lower your federal tax so it might be more like 20% combined (all assuming your are not in AMT land). I believe it depends on your state of residence. yes, you can minimize taxes by moving to a lower tax state.

Warren would only need to move himself, not the company.

http://www.tax-rates.org/income-tax-...kets#undefined is a useful site that you could look at federal and state taxes combined.
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Old 04-20-2014, 05:41 PM   #5
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...dividends only are taxed in Tennesee and New Hampshire.
Capital gain distributions from a mutual fund (but not, apparently, capital gains on the sale of a mutual fund) are also taxed in TN:

http://www.state.tn.us/revenue/taxgu...ndincguide.pdf
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Old 04-21-2014, 03:30 AM   #6
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Its simple move to one of the states that does not have an income tax, Alaska, Nevada, Florida, South Dakota, Texas, Wyoming, and Washington, and dividends only are taxed in Tennesee and New Hampshire.
So that does give you a fairly large choice of climate, cold,or hot, wet or dry, flat or mountain scenery.
Even then you have to be careful. I was looking at a chart of total state taxes. If you are in the top 15% of earners, total taxes in Texas are better, but for the lower 85%, you are better off in California. People routinely over-estimate where they are on that scale.
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Old 04-21-2014, 05:59 AM   #7
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Even then you have to be careful. I was looking at a chart of total state taxes. If you are in the top 15% of earners, total taxes in Texas are better, but for the lower 85%, you are better off in California. People routinely over-estimate where they are on that scale.
I'm assuming that's because of deductions and adjustments that change your effective tax? In Mass, it's a flat tax; "take 5.2% of your total gross income and send it in"; no deductions.
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Old 04-21-2014, 06:40 AM   #8
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It would likely be a little less than 21% because the 6% of state taxes would be deductible for federal tax purposes and would slightly lower your federal tax so it might be more like 20% combined (all assuming your are not in AMT land). I believe it depends on your state of residence. yes, you can minimize taxes by moving to a lower tax state.

Warren would only need to move himself, not the company.

Income Tax Calculator - Tax-Rates.org is a useful site that you could look at federal and state taxes combined.
Just looked at this and found that the taxes they have listed for Minnesota are wrong. The 2012 election led to the DFL having a majority in both house & senate and to plug a deficit they raised taxes to 9.85% on singles over $150k and married over $250k. This isn't reflected in the tax-rates.org brackets for 2013 when it took effect.
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