If you held the land more than a year, the federal tax on the gain is 0, 15 or 20 percent depending on your income, plus 3.8 percent on top if your income is high. In 2026 the 0 percent rate covers taxable income up to $49,450 for a single filer and $98,900 for a married couple filing jointly. Your state adds anywhere from nothing (Texas, Florida, Washington on land) to 13.3 percent (California). Inherited land is taxed only on the growth since the date of death.
The gain is the sale price, minus selling costs, minus your basis. The rate depends on how long you held the land and what else you earned that year. The federal part is simple. The basis math is where money hides, and the state part is a lookup, which the table below handles.
This is general information, not tax advice. A CPA should run the numbers on your return.
What federal rate applies to vacant land?
IRS Topic 409 sets the dividing line: land held more than one year gives a long-term gain, and land held one year or less gives a short-term gain taxed at your ordinary rate. The long-term rates are 0, 15 and 20 percent, and the income thresholds move every year. For 2026, Revenue Procedure 2025-32 sets them at:
| Filing status | 0 percent up to | 15 percent up to | 20 percent above |
|---|---|---|---|
| Single (and married filing separately) | $49,450 | $545,500 (separate: $306,850) | the 15 percent ceiling |
| Married filing jointly | $98,900 | $613,700 | $613,700 |
| Head of household | $66,200 | $579,600 | $579,600 |
The thresholds apply to taxable income, which includes the land gain itself. A gain can straddle a threshold: part of it taxed at 0 percent, the rest at 15. On a $40,000 gain taxed entirely at 15 percent, the federal tax is $6,000.
Does the 3.8 percent net investment income tax apply to land?
It can. Under IRS Topic 559 the 3.8 percent tax applies to the lesser of your net investment income or the amount your modified adjusted gross income exceeds $200,000 (single or head of household), $250,000 (married filing jointly) or $125,000 (married filing separately). Topic 559 lists the kinds of income that count as net investment income. Gain from selling property can be included, and a CPA decides whether your sale is.
How do you calculate the gain on land?
Gain is the amount realized minus your adjusted basis. IRS Topic 409 says basis is generally your cost. For land, the pieces people forget are in IRS Publication 551, which lists these as increases to basis: assessments for local improvements such as water connections, sidewalks and roads; legal fees for defending or perfecting title; and zoning costs. Pub. 551 also says your basis includes the settlement fees and closing costs for buying the property, but not the fees for getting a loan on it. Pull the settlement statement from your purchase.
Annual property tax you pay as the owner is not on that list; Pub. 551 treats real estate taxes separately, so ask your preparer how yours were handled.
If I sell inherited land, is it taxable?
Only the part above the stepped-up basis. Under 26 U.S.C. 1014(a)(1), the basis of property you inherit is its fair market value on the date of the person's death. If land was worth $60,000 at death and you sell it for $65,000, your taxable gain is $5,000, not the difference between $65,000 and what the decedent paid decades ago. Get a date-of-death appraisal, because that number is your basis.
Holding period is generous too. Under 26 U.S.C. 1223(9), inherited property sold within a year of the death is treated as held more than one year, so the gain is long-term even if you sell the next month. Our how to sell inherited land guide covers the rest of the sale, and the sell inherited land page covers selling for cash.
Gifted land works the opposite way. IRS Publication 551 says your basis for figuring gain on a gift is generally the donor's adjusted basis, so there is no step-up. A child given land decades ago starts from the donor's old basis, which can be far below what the land is worth today.
What state capital gains tax applies to land?
Eight states have no income tax, and a ninth, Washington, exempts real estate from its capital gains tax. A few states give long-term gains a discount. Everywhere else the gain is taxed at the state's ordinary rate. The list below uses Tax Foundation's table of top rates as of January 1, 2026; the discounts come from its capital gains table.
| State | Top rate on ordinary income, 2026 | How a land gain is taxed |
|---|---|---|
| Alabama | 5.00% | Taxed as ordinary income (graduated; the top rate applies only at high income) |
| Alaska | none | No state income tax, so no state tax on the gain |
| Arizona | 2.50% flat | 25 percent of long-term gain excluded; top effective rate about 1.875 percent |
| Arkansas | 3.90% | 50 percent of long-term gain excluded; top effective rate about 1.95 percent |
| California | 13.30% | Taxed as ordinary income (graduated; the top rate applies only at high income) |
| Colorado | 4.40% flat | Taxed as ordinary income |
| Connecticut | 6.99% | Taxed as ordinary income (graduated; the top rate applies only at high income) |
| Delaware | 6.60% | Taxed as ordinary income (graduated; the top rate applies only at high income) |
| Florida | none | No state income tax, so no state tax on the gain |
| Georgia | 5.19% flat | Taxed as ordinary income |
| Hawaii | 11.00% | Lower statutory rate on gains: 7.25% (Tax Foundation's 2024 table) |
| Idaho | 5.30% flat | Taxed as ordinary income |
| Illinois | 4.95% flat | Taxed as ordinary income |
| Indiana | 2.95% flat | Taxed as ordinary income |
| Iowa | 3.80% flat | Taxed as ordinary income |
| Kansas | 5.58% | Taxed as ordinary income (graduated; the top rate applies only at high income) |
| Kentucky | 3.50% flat | Taxed as ordinary income |
| Louisiana | 3.00% flat | Taxed as ordinary income |
| Maine | 7.15% | Taxed as ordinary income (graduated; the top rate applies only at high income) |
| Maryland | 6.50% | Taxed as ordinary income (graduated; the top rate applies only at high income) |
| Massachusetts | 9.00% | Taxed as ordinary income (graduated; the top rate applies only at high income) |
| Michigan | 4.25% flat | Taxed as ordinary income |
| Minnesota | 9.85% | Taxed as ordinary income; 10.85% top rate on gains because of a 1% tax on net investment income over $1 million |
| Mississippi | 4.00% flat | Taxed as ordinary income |
| Missouri | 4.70% | Capital gains exempt from the income tax (Tax Foundation, 2026) |
| Montana | 5.65% | Lower statutory rate on gains: 4.1% in Tax Foundation's 2024 table; confirm the current figure with the Department of Revenue |
| Nebraska | 4.55% | Taxed as ordinary income (graduated; the top rate applies only at high income) |
| Nevada | none | No state income tax, so no state tax on the gain |
| New Hampshire | none | No state income tax, so no state tax on the gain |
| New Jersey | 10.75% | Taxed as ordinary income (graduated; the top rate applies only at high income) |
| New Mexico | 5.90% | 40 percent exclusion (from 2025 on up to $1 million of gain); top effective rate about 3.54 percent |
| New York | 10.90% | Taxed as ordinary income (graduated; the top rate applies only at high income) |
| North Carolina | 3.99% flat | Taxed as ordinary income |
| North Dakota | 2.50% | 40 percent of long-term gain excluded; top effective rate about 1.5 percent |
| Ohio | 2.75% flat | Taxed as ordinary income |
| Oklahoma | 4.50% | Taxed as ordinary income (graduated; the top rate applies only at high income) |
| Oregon | 9.90% | Taxed as ordinary income (graduated; the top rate applies only at high income) |
| Pennsylvania | 3.07% flat | Taxed as ordinary income |
| Rhode Island | 5.99% | Taxed as ordinary income (graduated; the top rate applies only at high income) |
| South Carolina | 6.00% | 44 percent of long-term gain excluded; top effective rate about 3.36 percent |
| South Dakota | none | No state income tax, so no state tax on the gain |
| Tennessee | none | No state income tax, so no state tax on the gain |
| Texas | none | No state income tax, so no state tax on the gain |
| Utah | 4.50% flat | Taxed as ordinary income |
| Vermont | 8.75% | Taxed as ordinary income (graduated; the top rate applies only at high income) |
| Virginia | 5.75% | Taxed as ordinary income (graduated; the top rate applies only at high income) |
| Washington | 7%, 9% over $1 million (capital gains only) | Real estate is exempt from the capital gains tax (RCW 82.87.050); no tax on a land sale under it |
| West Virginia | 4.82% | Taxed as ordinary income (graduated; the top rate applies only at high income) |
| Wisconsin | 7.65% | 30 percent deduction on long-term gain; top effective rate about 5.355 percent |
| Wyoming | none | No state income tax, so no state tax on the gain |
Two cautions on reading it. The "top rate" is the highest rate the state charges; on a graduated schedule most sellers fall in a lower bracket. And the table is a baseline: several states add subtractions, credits or local income taxes that it does not track, so confirm with the state's Department of Revenue or your preparer.
To see the difference in dollars, take that $40,000 gain. At Arizona's 1.875 percent effective top rate the state tax is $750. At Illinois's flat 4.95 percent it is $1,980. In Texas it is zero. Check the state where the land sits as well as your home state; a CPA can tell you which return the gain goes on.
Washington deserves a note. RCW 82.87.050(1) exempts "all real estate transferred by deed, real estate contract, judgment, or other lawful instruments" from the capital gains excise tax, so a Washington land sale owes none under it. That is not the same as owing nothing at closing; Washington has a separate real estate excise tax on the sale itself, which this page does not cover.
Can you defer the tax?
A 1031 exchange defers the gain if you reinvest in like-kind real estate on the exchange's schedule; the rules are in our 1031 exchange on land guide. If you take payments over time, an installment sale spreads the gain across years; see taxes on a land contract. For farm tracts, the farmland-specific steps are in how to sell farmland.
Frequently asked questions
What is the capital gains tax rate on vacant land?
Federal long-term rates are 0, 15 and 20 percent depending on taxable income, plus 3.8 percent for high earners. Land held a year or less is taxed as ordinary income. States add their own, from none to 13.3 percent.
Do I owe capital gains tax if I sell inherited land?
Only on the gain above the fair market value at the date of death (26 U.S.C. 1014). If you sell for close to that value you may owe little or nothing.
Which states have no capital gains tax on land?
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas and Wyoming have no state income tax. Washington's capital gains tax exempts real estate, and Missouri exempts capital gains, per the Tax Foundation's 2026 table.
How long do I have to hold land for long-term treatment?
More than one year (IRS Topic 409). Inherited land sold within a year of death is treated as long-term under 26 U.S.C. 1223(9).