Texas does not have a capital gains tax, and as of the November 2025 election, the Texas Constitution prohibits the legislature from ever creating one without another statewide vote. That protection covers individuals, families, estates, and trusts, and it applies to both realized gains from a sale and unrealized gains sitting in a portfolio. Federal capital gains taxes, however, still apply to every Texas resident, and those are where your planning attention belongs.
The Constitutional Ban on State Capital Gains Taxes
Texas voters built the protection in two stages. In November 2023, Proposition 3 added Section 24-c to Article VIII of the Texas Constitution, banning any tax based on the wealth or net worth of an individual or family.1State of Texas. Texas Constitution Article VIII – Taxation and Revenue That closed the door on net-worth levies but left capital gains — the profit from selling an asset — unaddressed.
Proposition 2 on the November 4, 2025 ballot closed that gap.2Texas Secretary of State. Explanatory Statements for the November 4, 2025 Constitutional Amendment Election The measure, which passed with roughly 65% of the vote, added Section 24-b to Article VIII. It prohibits any tax on the realized or unrealized capital gains of an individual, family, estate, or trust, and it specifically covers taxes on the sale or transfer of a capital asset payable by the seller.3Texas Legislature. 89(R) SJR 18 – Enrolled Version Because the ban lives in the constitution, no future legislature can impose such a tax without first winning another statewide vote.
The reach is broad. Stocks, bonds, real estate, business interests, cryptocurrency, and collectibles are all protected at the state level. Paper gains on assets you still hold are protected too. Texas cannot tax the profit when you sell, and it cannot tax the appreciation while you hold.
What Texas Still Taxes
Section 24-b carves out several existing taxes so the amendment cannot be used to challenge them. Property taxes, sales taxes, and use taxes are all unaffected.3Texas Legislature. 89(R) SJR 18 – Enrolled Version Buy a car, and you still pay sales tax. Own a home, and you still owe property tax on the appraised value. The franchise tax on many Texas businesses also remains in place, since it is structured on business revenue margins rather than on individual gains.
This puts Texas in a stronger position than some other states without a personal income tax. Washington, for example, has no income tax but charges 7% on long-term capital gains above a threshold.4Washington Department of Revenue. Capital Gains Tax Texas has locked that option out.
Federal Rates for 2026
The IRS still expects its share regardless of where you live. You report investment profits on Schedule D of Form 1040, and the rate depends on how long you held the asset and what your taxable income looks like.5Internal Revenue Service. About Schedule D (Form 1040), Capital Gains and Losses
Long-Term Gains: Assets Held More Than One Year
Long-term gains get preferential rates of 0%, 15%, or 20%. For the 2026 tax year, the brackets are:6Internal Revenue Service. Revenue Procedure 2025-32
- 0% rate: taxable income up to $49,450 single, $98,900 married filing jointly, or $66,200 head of household.
- 15% rate: income above those amounts up to $545,500 single, $613,700 married filing jointly, or $579,600 head of household.
- 20% rate: income above the 15% ceiling.
Those thresholds are based on total taxable income, not just the gain. A married couple with $80,000 in wages and a $30,000 long-term gain might straddle the 0% and 15% brackets depending on deductions.
Short-Term Gains: Assets Held One Year or Less
Sell within a year and the profit is taxed as ordinary income. For 2026, ordinary rates run from 10% to 37%, with the top bracket starting at $640,600 for single filers and $768,700 for married couples filing jointly.7Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 The difference between selling at 11 months and 13 months can move your federal rate from 37% down to 20% or lower.
The 3.8% Net Investment Income Tax
Higher earners face an additional 3.8% surtax on investment income. The Net Investment Income Tax applies to the lesser of your net investment income or the amount by which your modified adjusted gross income exceeds these thresholds:8Office of the Law Revision Counsel. 26 USC 1411 – Imposition of Tax
- Single or head of household: $200,000
- Married filing jointly: $250,000
- Married filing separately: $125,000
These thresholds are not indexed for inflation, so more taxpayers cross them each year. A married couple with $300,000 in income and $60,000 in gains would owe the 3.8% on $50,000, the amount over the $250,000 line. This is the layer most people forget when estimating a federal bill, and it can push the effective top rate on long-term gains to 23.8%.
Rules That Change by Asset Type
Texas treats every asset class the same. The IRS does not.
Home Sales
Sell your primary residence after living in it for at least two of the past five years and you can exclude up to $250,000 of gain from federal tax, or up to $500,000 filing jointly if your spouse also meets the use test.9Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence For many Texas homeowners, the exclusion wipes out the federal bill entirely, leaving zero owed at either level.
Collectibles and Precious Metals
Gold, silver, rare coins, artwork, and similar collectibles are taxed less favorably than stocks or real estate. Long-term gains on collectibles are taxed at your ordinary rate up to a cap of 28%, not the standard 20% ceiling.10Office of the Law Revision Counsel. 26 USC 1(h) – Maximum Capital Gains Rate Someone in the 24% ordinary bracket pays 24% on a long-term gold sale; someone in the 37% bracket pays the capped 28%.
Cryptocurrency and Digital Assets
The IRS treats digital assets, including cryptocurrency, stablecoins, and NFTs, as property rather than currency.11Internal Revenue Service. Digital Assets Every sale, exchange, or trade between coins is a reportable event. Standard long- and short-term rates apply. Texas takes nothing, but the IRS wants a full accounting.
Federal Tools to Defer or Reduce the Bill
Two legal structures let you postpone or shrink what you owe the IRS on large transactions.
1031 Like-Kind Exchanges
If you sell investment real estate and reinvest the proceeds into a replacement property of equal or greater value, you can defer the entire federal capital gains tax through a 1031 exchange. The replacement must also be real property held for business or investment; personal residences do not qualify.12Office of the Law Revision Counsel. 26 USC 1031 – Exchange of Real Property Held for Productive Use or Investment
The deadlines are strict. You have 45 days from the closing date to identify a replacement property in writing, and 180 days to complete the purchase. Miss either deadline and the deferral collapses. You also cannot handle the sale proceeds directly. They must sit with a qualified intermediary through the exchange, and the IRS does not grant extensions for good intentions.
Qualified Opportunity Zone Funds
Opportunity Zone funds let investors defer taxes on capital gains by rolling them into a fund targeting designated low-income areas. The original deferral runs until the end of 2026 or until the fund interest is sold, whichever comes first. For investments held at least ten years, any new gains generated inside the fund are permanently excluded from federal tax. The earlier basis step-ups tied to five- and seven-year holds required investments made in time to hit those marks by 2026, so the ten-year permanent exclusion is the main draw remaining for new investors.
What the Ban Means for Planning
State-level tax planning around capital gains is now a non-issue for Texas residents. There is nothing to plan around, and that cannot change without another constitutional amendment on a statewide ballot. The planning work shifts entirely to federal exposure: holding assets past the one-year mark, tracking the NIIT thresholds, using the home-sale exclusion fully, and structuring investment real estate sales through a 1031 when it fits.
For someone relocating from California or New York, where combined state and local rates on capital gains can reach 13% or more, the savings on a single large transaction can be significant. A $500,000 stock gain that would trigger roughly $65,000 in California state tax triggers nothing in Texas.