Capital gains tax in Louisiana (2026): selling a business, real estate or farm

The business sale deduction is gone, except on old notes

For years Louisiana had one of the most generous seller breaks in the country. R.S. 47:293(9)(a)(xvii) let an owner deduct net capital gain from selling an equity interest in, or substantially all the assets of, a nonpublicly traded business commercially domiciled in Louisiana. Form R-6180 (1/25) scaled the deduction by years of Louisiana domicile: 50% at 5 to 10 years, rising in steps to 100% at 30 years or more.

Act 11 of the 2024 Third Extraordinary Session repealed it (LDR RIB 25-012). The 2025 IT-540 instructions limit code 20E to installment and perfected sales before Jan. 1, 2025. If you sold a qualifying business on an installment note in 2024 or earlier, keep claiming the deduction on each year's payments with Form R-6180. A business sold in 2026 gets no deduction; read capital gains tax on the sale of a business for the federal levers that remain.

A flat 3%, with fewer deductions around it

The same reform replaced Louisiana's 1.85% to 4.25% brackets with a flat 3% starting in 2025, nearly tripled the standard deduction to $12,500 single and $25,000 joint, and doubled the age-65 retirement income exemption to $12,000 per person, both indexed from Jan. 1, 2026 (RIB 25-012). Earlier, Act 395 of 2021 repealed the deduction for federal income tax paid, effective 2022 (Louisiana Department of Revenue). A large federal bill no longer shrinks the Louisiana base, which matters most in a big gain year.

For federal context in one line: long-term gains are taxed at 0%, 15% or 20%, the 20% rate beginning above $613,700 of joint taxable income in 2026 (Rev. Proc. 2025-32). See the long-term capital gains guide.

Worked example: a rental portfolio sale

The first example is a couple selling rentals held 15 years for a $1.15 million total gain. Federally, $250,000 is unrecaptured Section 1250 gain taxed at up to 25% (IRC 1(h), 2026); Louisiana taxes every dollar at 3%. The sale causes $245,313 of federal income tax, $38,380 of net investment income tax and $34,500 of Louisiana tax, so Louisiana is a small share of the cost.

The levers here are federal. A 1031 exchange into more property defers both the federal and Louisiana tax because Louisiana starts from federal adjusted gross income, and an installment sale spreads the gain over the years you are paid. More detail is on capital gains tax on rental property.

When Louisiana taxes a gain the IRS does not

The 0% federal bracket covers long-term gain up to $98,900 of joint taxable income in 2026 (Rev. Proc. 2025-32). Louisiana has no such bracket. In the second example, a retired couple with $40,000 of other taxable income sells land for a $50,000 gain: federal tax caused is $0, while Louisiana's 3% still produces $1,500. Their retirement income exemption shelters pension and IRA income, not capital gains. Sellers who harvest gains in the federal 0% bracket should budget for the Louisiana line; see 0% capital gains harvesting.

Community property and inherited Louisiana assets

Louisiana is a community property state, and that changes basis at death. Under IRC 1014(b)(6), when one spouse dies, both halves of community property can receive a basis equal to fair market value, not just the decedent's half. A surviving spouse who sells the family business building or farmland soon after can show little or no gain at either level. Louisiana has no estate or inheritance tax on top. Compare holding until death with a sale now, and see capital gains on inherited property.

Farms, timber, nonresidents and neighbors

Louisiana offers no separate exclusion for farmland, timberland or livestock, so the 3% rate (2026) applies to all of it. Federally, timber can qualify for capital gain treatment under IRC 631(b) when sold with a retained economic interest; see timber sale taxes and capital gains tax on farmland.

Nonresidents file Form IT-540B and owe Louisiana tax on gain from Louisiana real estate and business property; gain on stock generally follows residence, which is the case moving before a sale examines. Neighboring rules are on the Texas and Mississippi pages.

Hans studies the tax side of Louisiana exits and compares cash, note and exchange paths. Get the Big Sale Tax Analysis.

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