The States With the Highest Tax Burdens - See Where Yours Ranks

Many people focus on income tax rates when comparing states. That's understandable. Income taxes are easy to see on a paycheck. The problem is they only tell part of the story. A state that doesn't collect income taxes may still take a sizable bite out of your budget through other levies.

That's why it is important to look at the tax burden instead. This measures total state and federal taxes as a percentage of a resident's income, giving a broader view of what people actually pay. A recent FinanceBuzz study used Census data and current tax rates to calculate the effective tax rate in every state.

If you're looking to prepare yourself financially or simply understand where your money goes, this is one of the more useful comparisons available.

California

Estimated tax burden: 20.89%

California's progressive income tax system plays a major role in its ranking, with rates that climb steeply for higher earners. Long-term homeowners, though, may benefit from limits on property tax assessment growth. Proposition 13 caps annual increases in assessed value, so two households on the same street can face very different bills depending on when they bought.

For retirees, the picture is mixed. California does not tax Social Security benefits, which helps those who rely heavily on them. But most other retirement income, including pensions and withdrawals from traditional IRAs and 401(k)s, is fully taxed as ordinary income, at some of the highest rates in the country. Pre-retirees with large tax-deferred balances should factor that in.

Colorado

Estimated tax burden: 21.16%

Colorado applies a flat state income tax, which simplifies planning compared with bracket-based systems. Property taxes are a bright spot: the state has among the lowest effective property tax rates in the country.

Colorado is also notably retiree-friendly on income. Taxpayers 65 and older can deduct the full amount of their federally taxable Social Security benefits, and there's an age-based subtraction for pension and other retirement income, worth up to $24,000 for those 65 and older and $20,000 for those aged 55 to 64. As of 2025, the full Social Security deduction was extended to many filers aged 55 to 64 whose income falls below set limits, which matters for those approaching retirement.

Hawaii

Estimated tax burden: 21.21%

Hawaii carries some of the highest income tax rates in the nation, which drives its ranking. Yet retirees may not feel the full weight of those rates. Hawaii does not tax Social Security benefits, and it is unusually generous with traditional pensions: employer-funded pension income is exempt, while the portion you funded yourself, such as 401(k) deferrals and IRA withdrawals, is taxable.

On property, Hawaii is often misunderstood. Its median effective property tax rate is the lowest in the country, but sky-high home values mean the actual dollars paid land closer to the middle of the pack. Anyone weighing Hawaii should budget for the overall cost of living, not just the low rate.

Minnesota

Estimated tax burden: 21.43%

Minnesota has relatively high overall taxes, and property taxes run above the national median, with the typical homeowner paying around $3,500 a year.

It's also one of the few states that taxes Social Security, though with relief built in. For 2025, a means-tested subtraction exempts benefits for married couples with adjusted gross income under $108,320 and single filers under $84,490, with the benefit phasing out above those levels. Most other retirement income, including pensions and 401(k)/IRA distributions, is fully taxable. For retirees with significant income, Minnesota is one to model carefully.

Virginia

Estimated tax burden: 21.43%

Virginia lands here largely on its income tax, but it treats retirees comparatively well and pairs that with relatively low property and sales taxes.

Virginia does not tax Social Security benefits. On top of that, residents 65 and older can claim an age deduction of up to $12,000 that applies to any retirement income, whether from a pension, 401(k), or IRA. The catch worth planning around: that deduction phases out by $1 for every $1 of federal AGI above $50,000 for single filers and $75,000 for married filers, so its value shrinks as other income rises.

New Jersey

Estimated tax burden: 21.46%

Property taxes have shaped New Jersey's reputation for decades. The median homeowner pays over $9,000 a year, the highest in the nation, and for many households that bill outweighs income tax. The state does offer relief programs, including the Senior Freeze and the newer Stay NJ credit for residents 65 and older.

On retirement income, New Jersey is friendlier than its reputation suggests. Social Security is not taxed at the state level. And taxpayers 62 and older with income of $150,000 or less can exclude a large share of pension, annuity, and retirement-account income, up to $75,000 for single filers and $100,000 for joint filers. But watch the cliff: cross the $150,000 income threshold and the exclusion disappears entirely.

New York

Estimated tax burden: 22.09%

New York residents face a combination of state income tax and, in some areas, local income taxes, alongside sales and property taxes that rank among the highest in the country. The burden also varies sharply by location, with suburban homeowners often facing steep property bills. The School Tax Relief (STAR) program offers property tax relief to eligible homeowners, with enhanced benefits for seniors.

For retirees, New York is more generous than its reputation. Social Security is fully exempt, and pensions from federal, state, and local governments are exempt as well. For private retirement income, filers 59½ and older can exclude up to $20,000 of pension and annuity income, including IRA and 401(k) withdrawals, with anything above that taxed at regular rates.

Maryland

Estimated tax burden: 22.40%

Maryland's ranking reflects its income tax plus local county income taxes layered on top. Property taxes are close to the national median, though higher home values can push the actual bill up. Retirees should also note that Maryland is the only state with both an estate tax and an inheritance tax.

On income, Social Security is fully exempt. Maryland also offers a sizable pension exclusion, up to $41,200 for the 2025 tax year for residents 65 and older. One important limit for pre-retirees to know: that exclusion applies to qualified employer-plan income like pensions and 401(k)s, but not to traditional IRA distributions, which are fully taxed.

Massachusetts

Estimated tax burden: 23.52%

Massachusetts has the second-highest effective tax burden in the study, driven in part by high median incomes that push more income into taxed brackets. Property taxes sit near the national median in rate terms, but the state's expensive housing market raises the dollars paid. Retirees with larger estates should also note the state's $2 million estate tax exemption, far below the federal level.

For retirement income, Massachusetts is a split picture. Social Security is not taxed, and government pensions, including Massachusetts public pensions, federal pensions, and military pensions, are exempt. But private pensions, IRA, and 401(k) withdrawals are taxed at the flat 5% rate, with no broad age-based exclusion. Where your pension comes from matters a great deal here.

Oregon

Estimated tax burden: 24.41%

Oregon tops the ranking. A big reason is that it has the highest effective state-level tax rate of any state, at 7.86%. Notably, Oregon is often called tax-friendly because it has no statewide sales tax, but as its position shows, the absence of a sales tax doesn't translate to a low overall burden when income taxes run this high.

For retirees, the trade-offs are real. Oregon does not tax Social Security benefits. However, it taxes income from 401(k)s and IRAs at full rates, and most other retirement income is taxed at the top rate, with only limited credits available. On the plus side for homeowners, Oregon's effective property tax rate is slightly below the national average, and homeowners 62 and older may be able to defer property taxes if they qualify.

Why retirees should look beyond the rankings

Tax burden does provide a useful snapshot, but retirement planning usually requires a closer look at the details. Questions worth asking include:

• Does the state tax Social Security benefits?
• How are IRA and 401(k) withdrawals treated?
• Are senior property-tax exemptions available?
• What local taxes apply where you plan to live?

The answers can vary dramatically from state to state. A state with relatively high overall burden could still be attractive for retirees if key sources of retirement income receive favorable tax treatment.

Bottom line

Tax burden can be a useful shortcut when comparing states, especially if you're considering a move. Looking at the full picture of state and local taxes often reveals costs that aren't obvious from income tax rates alone.

One surprising financial mistake people make is focusing on taxes while overlooking housing, insurance, and health care costs. In some cases, a state with a slightly higher tax burden may still leave you with more disposable income if other major expenses are lower.

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