As Tax Day approaches, many Americans brace themselves for the financial impact of their tax obligations. It’s no secret that state and local taxes can significantly affect a taxpayer’s overall burden.
With the average U.S. household paying nearly $14,000 in federal income taxes, the stakes are higher in some states than others.
In fact, residents in the costliest states can pay more than double what their counterparts in lower-tax states owe.
Understanding the financial landscape is crucial for taxpayers, especially when considering relocation or budgeting for the year ahead.
From California’s steep income taxes to New York’s combined state and local burdens, some states consistently rank as the most expensive for taxpayers.
This guide dives into the ten costliest states, shedding light on how their tax structures impact the wallets of residents and what that means for anyone navigating the often complex world of taxes.
1: New York
New York consistently tops the list of costliest states for taxpayers. Residents face a staggering average state and local tax burden of about 12.7%.
This high tax rate translates into significant costs, especially for income and property taxes, with urban areas like New York City having additional assessments.
The state also implements various taxes, including sales tax and estate tax, adding layers to the financial obligations of its citizens.
Complicated tax rules further complicate the situation, making it challenging for taxpayers to navigate. Overall, New York presents a considerable financial challenge, highlighting the importance of thorough tax planning.
2: Hawaii
Hawaii ranks as one of the costliest states for taxpayers. The top income tax rate sits at a staggering 11%. Notably, residents don’t need to be millionaires for the state to tax income at this high rate.
Single and married filing separately taxpayers face the 11% burden on more than $200,000 of taxable income. Heads of household encounter the same tax rate on earnings exceeding $300,000.
Joint filers discover that incomes above $400,000 are also taxed at this level. These figures illustrate how significantly Hawaii’s tax structure impacts financial planning for its residents.
3: Maine
Maine ranks as one of the top states for taxpayers due to its tax burden. Taxpayers in Maine face an average state and local tax rate around 11%. This significant percentage places additional pressure on residents, impacting their financial situation.
Income tax in Maine is notably progressive, with rates reaching up to 7.15%. This rate applies to single filers earning over $23,000 and joint filers earning more than $46,000.
Furthermore, property taxes in the state rank among the highest in the nation, averaging about 1.37% of property value.
Sales tax adds to the overall burden, sitting at 5.5% on most goods and services. Such factors contribute to Maine’s status as one of the costliest states for taxpayers, emphasizing the need for strategic financial planning.
4: Vermont
Vermont ranks among the costliest states for taxpayers, with an average state and local tax burden of about 11.1%. This high rate underscores the financial pressures faced by residents.
Income tax rates in Vermont are progressive, peaking at 8.75% for individuals earning over $200,000.
Property taxes also contribute significantly, averaging around 1.90% of property value, which is among the highest in the nation.
Sales taxes add another layer of expense, currently set at 6% on most goods and services. The combination of these factors creates a complex tax environment, demanding careful financial consideration from those living in Vermont.
5: Connecticut
Connecticut’s tax burdens put it high on the list of costliest states for taxpayers. Residents deal with a top marginal state income tax rate of 6.99%, which is significant compared to many states.
Homeownership also carries hefty costs here, with the median home value around $367,800, pushing property tax liabilities to $6,388 annually.
Utilities present another financial challenge, costing approximately 35% more than the national average. Connecticut’s overall cost of living is about 107% higher than the U.S. average, impacting household budgets.
Commuters working in New York City further escalate living expenses, as many travel to high-paying jobs, reinforcing the state’s status as costly for taxpayers.
6: New Jersey
New Jersey ranks as one of the highest-cost states for taxpayers, driven by several factors that affect its residents financially.
Health care costs in New Jersey exceed the national average by 8%, while housing expenses are a staggering 37% higher.
The median household income stands at $99,781, with a mean income of $138,153, both substantially above national figures.
Property tax rates in New Jersey top the charts nationwide. Homeowners face median property taxes of $9,163 annually, tied to a median home value of $461,000.
Also, the state imposes a high top individual income tax rate of 10.75%, placing further strain on taxpayers. Overall, these factors create a challenging financial landscape for New Jersey residents.
7: Maryland
Maryland ranks as one of the costliest states for taxpayers. With a median home value of $413,600, it stands about $40,000 higher than the U.S. median.
The property taxes paid by homeowners average approximately $3,936 annually, which is $900 more than the national average of $3,057. Grocery prices in Maryland are notably high, exceeding the national average by 8.5%.
Income taxes also contribute to financial strain, with a top marginal state income tax rate of 5.75%. Health care and transportation costs aren’t far off the national average, which keeps some expenses manageable.
However, the combined tax burden makes Maryland a challenging place for residents when it comes to affordability.
8: Minnesota
Minnesota ranks among the costliest states for taxpayers, presenting a significant financial burden. With an average state and local tax rate hovering around 11%, residents bear a heavy load.
Income tax rates are progressive, reaching up to 9.85% for individuals earning over $166,040. Property taxes also pose a challenge, averaging about 1.12% of property value, making homeownership costly.
Sales taxes add to the overall tax equation, currently set at 6.875%, which is higher than the national average.
The combination of these factors underscores the importance of effective financial planning for residents navigating Minnesota’s tax landscape.
9: Illinois
Illinois ranks high on the list of costliest states for taxpayers, largely due to its state and local tax obligations. Taxpayers in the state face an average combined tax burden of approximately 12.7%, which is significant.
The state utilizes a flat income tax rate of 4.95%, but local taxes can elevate the overall bill substantially.
Also, property taxes in Illinois are among the highest in the nation, with many residents paying around 2.3% of their property’s value.
This can take a considerable toll on household finances. Furthermore, sales tax rates in Illinois reach 6.25%, contributing to the financial strain on families and individuals across the state. Understanding these implications is essential for strategic financial planning.
10: Iowa
Iowa ranks among the costliest states for taxpayers, with an average tax burden that can weigh heavily on residents.
Taxpayers in Iowa deal with a state and local tax rate of about 8.9%, which contributes significantly to their overall financial responsibilities.
Property taxes, for example, can be a substantial expense, averaging around 1.29% of the property value.
Individuals also face a progressive income tax structure, where rates can reach up to 8.53% for higher earners. These factors combined create a challenging financial landscape for many Iowans, making effective budgeting crucial.
With these taxes affecting households differently, understanding Iowa’s tax implications is vital for residents and those contemplating a move.
Alicia Richards