Louisiana Capital Gains Tax, Explained

Through 2024, Louisiana taxed income on a graduated schedule that topped out at 4.25%. Governor Landry's tax reform package changed that. Voters approved a constitutional amendment in November 2024, and the legislature's companion act repealed the graduated brackets entirely, replacing them with a single flat 3% rate on Louisiana taxable income for taxable periods beginning on or after January 1, 2025. There's no separate capital gains rate. Every dollar of gain, whether it's stock, crypto, a rental in Baton Rouge, or a business interest, is ordinary income to the state, taxed at that one flat rate.

Worked example: sell for a $150,000 gain and Louisiana's cut is $4,500, 3%, full stop. No brackets to climb, no separate rate for short-term versus long-term. Compare that to the old top bracket of 4.25%, and most Louisiana sellers are paying less state tax on a gain today than they would have in 2024, even without the business-sale deduction that used to exist (more on that below).

Notice the first row: a long-term gain the IRS taxes at 0% is still Louisiana income. Because Louisiana's return starts from your federal numbers, the same gain that owes nothing to the IRS still owes 3% to the state.

If you researched Louisiana capital gains tax before the 2024 reform, you may remember a state-specific break under R.S. 47:293(9)(a)(xvii): a deduction for the net capital gain on selling an equity interest in, or substantially all the assets of, a non-publicly traded business commercially domiciled in Louisiana. It required both you and the business to have been in place for at least five years, and the deduction percentage climbed the longer the business had been domiciled in the state, from 50% at the five-year mark up to a full 100% exclusion at 30 years or more.

That statute no longer exists. As part of the same 2024 tax reform package that created the flat 3% rate, the legislature repealed R.S. 47:293(9)(a)(xvii) outright, effective for sales and exchanges on or after January 1, 2025. If you're planning the sale of a Louisiana business today, there is no state-level exclusion waiting for you at the five-year mark. The gain is simply Louisiana ordinary income at 3%, same as everything else.

The takeaway for anyone selling a business built and held in Louisiana: the state tax planning conversation has shifted entirely to the federal side, entity structure, and sale timing, since the old five-year Louisiana carrot is off the table.

Louisiana's flat 3% is only the state layer. The federal government still taxes the gain under its own rules: 0%, 15%, or 20% for long-term gains depending on your bracket, ordinary federal rates up to 37% for short-term gains, and the 3.8% net investment income tax layered on above $200,000 MAGI (single) or $250,000 (married filing jointly).

Because Louisiana's return builds from your federal adjusted gross income, the planning moves that shrink your federal number do double duty automatically:

• Loss harvesting: losses that offset gains federally shrink the Louisiana number in the same motion.
• Gain timing: a gain pushed into a lower-income year saves at both layers at once.
• 1031 exchanges: gain deferred federally generally stays out of Louisiana income too, with no separate state tracking form.
• Installment sales: spreading a gain across years spreads the Louisiana bill along with the federal one.

On the federal side, a rental sale splits into layers: the depreciation you claimed comes back as recapture at up to 25%, the remaining gain gets long-term rates, and the NIIT can ride on top. Louisiana flattens the whole stack, recapture and appreciation alike, into ordinary income at the flat 3% rate.

Worked example: you sell a New Orleans-area rental for a $200,000 total gain, of which $60,000 is depreciation recapture, and you're in the 15% federal bracket. Federal: $60,000 x 25% = $15,000, plus $140,000 x 15% = $21,000, for $36,000. Louisiana: $200,000 x 3% = $6,000, no separate recapture rate, no separate schedule. Combined: about $42,000 before any NIIT.

Two notes follow from that math. First, because Louisiana's bill scales with the total gain at a low flat rate, the state side of recapture is mild, the federal 25% layer is where recapture actually hurts, so sizing your accumulated depreciation before you list is the useful homework. Second, if a 1031 exchange is on the table, the deferral generally carries the Louisiana tax along with the federal one, since Louisiana starts from federal AGI.

Two kinds of Louisiana sellers ask about this page more than most: owners of working or royalty interests in oil-and-gas properties, and owners of investment or short-term-rental property in and around New Orleans. Both face the same state math now, a flat 3% on the gain, with the interesting complexity sitting entirely on the federal side.

Selling a working interest or royalty interest in oil-and-gas property can trigger recapture of depletion deductions claimed over the years, taxed federally as ordinary income, similar in spirit to depreciation recapture on a rental. Louisiana's role is unchanged either way: the entire gain, whatever its federal character, is ordinary Louisiana income at the flat 3% rate. There's no special state treatment for mineral interests and no separate Louisiana schedule for the industry.

For a New Orleans-area rental or short-term rental sold after using the STR strategy to accelerate depreciation, the exit math works the same way it does for any rental: the depreciation that sheltered income during ownership generally comes back as recapture at sale, and Louisiana taxes that recapture at 3% along with the rest of the gain.

Estimated tax payments guide