When it comes to taxes, federal rates and the IRS tend to grab all the headlines, but you can’t ignore state tax rates. While state tax rates are typically far below federal rates, taxpayers often overlook them until tax filing time.
If you don’t plan for your state taxes, you might encounter some unpleasant surprises come April 18, which is tax-filing day in 2023.
States have the freedom to generate tax revenue as they see fit, and they generally do it in three ways: income tax, sales tax and property tax. In some states, a low rate in one category is made up for with high rates in the other categories. In others, you might face high tax rates across the board.
GOBankingRates used the Tax Foundation’s 2022 state income tax bracket data to find each state’s top income tax rate, combined state and average local sales tax, and average property tax.
Here are the 10 most expensive states for filing taxes, ranked by highest state income tax rates. (Note: If Washington, D.C., were a state, it would come in at No. 3 on this list.)
1. California
Top individual income tax rate: 13.30%
Combined state and average local sales tax: 8.68%
Average property tax: 0.70%
When it comes to taxes, California is king. With a top income tax rate of 13.3%, California is more expensive than the No. 2 state by more than two full percentage points. Only two other states are in the double-digits. The pain doesn’t stop there for state residents, as California also claims one of the top 10 highest rates for sales tax among the 50 states as well.
2. Hawaii
Top individual income tax rate: 11%
Combined state and average local sales tax: 4.44%
Average property tax: 0.31%
Hawaii is one of only three states with a double-digit top income tax rate, which is enough to land it the No. 2 spot behind only California despite the state’s forgiving sales and property tax rates.
3. New Jersey
Top individual income tax rate: 10.75%
Combined state and average local sales tax: 6.60%
Average property tax: 2.13%
The last of the three states with double-digit income taxes, New Jersey is no stranger to the top five in lists of states whose residents suffer from high tax bills. Its property tax rate is the highest in the nation.
4. Oregon
Top individual income tax rate: 9.90%
Combined state and average local sales tax: 0.00%
Average property tax: 0.91%
Although not reaching the lofty heights of its neighbor California, Oregon ranks No. 4 on the list of highest top individual income tax rates. Residents enjoy big tax relief when it comes to sales taxes, as Oregon has neither state nor local sales taxes. Oregonians got a break when property taxes there dropped from nearly 1.08% in 2018 to less than 1% now.
5. Minnesota
Top individual income tax rate: 9.85%
Combined state and average local sales tax: 7.46%
Average property tax: 1.05%
Another state regularly in the top five is Minnesota, the only one so far that doesn’t touch an ocean but at least has lots of lakes. Although its income tax is brutal, the state’s property and sales taxes are only slightly higher than average.
6. New York
Top individual income tax rate: 8.82%
Combined state and average local sales tax: 8.52%
Average property tax: 1.30%
New York has a reputation for being a high-tax state, and to some degree, this is true. Its property taxes and sales taxes are well above the national average.
7. Vermont
Top individual income tax rate: 8.75%
Combined state and average local sales tax: 6.24%
Average property tax: 1.76%
Vermont is another state that has high taxes across the board, which is hardly unusual in New England. Its income taxes and property taxes are especially burdensome.
8. Iowa
Top individual income tax rate: 8.53%
Combined state and average local sales tax: 6.94%
Average property tax: 1.43%
The second Midwestern state on the list is Iowa, where income and property taxes are high. Sales tax there is above the national average, as is the average property tax.
9. Wisconsin
Top individual income tax rate: 7.65%
Combined state and average local sales tax: 5.43%
Average property tax: 1.53%
In Wisconsin, both income and property taxes are high. Combined sales tax, however, is more than a full percentage point below the national average.
10. Maine
Top individual income tax rate: 7.15%
Combined state and average local sales tax: 5.50%
Average property tax: 1.20%
The state and local taxes are below the national average, but residents of this New England state will pay more when it comes to top individual tax rate and property taxes.
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Methodology: In order to discover the 10 most expensive states to file taxes, GOBankingRates used the Tax Foundation’s 2022 state income tax bracket data to find each state’s (1) highest individual income tax rate. Factor (1) was the only factor that was used to determine overall rankings. GOBankingRates also found each state’s (2) combined state and average local sales tax and (3) average property tax rate all sourced from Tax Foundation for supplemental data. All data were collected on and up to date as of March 22, 2022.