As we gather paperwork for annual taxes, residents of certain states will likely see more money pulled out for taxes than others. FinanceBuzz crunched the numbers to find out and compare the tax rate by state. In looking at those details, the states where people pay the most in taxes seem to do so whether filing as an individual or as a couple.
Check to see if you’re in one of the states paying the highest in income taxes.
Individual taxpayers in Oregon have the highest income tax rate compared to any other state in the U.S., while couples are paying the second-highest total effective tax rate. One of the biggest reasons for this is the state’s effective tax rate — the highest in the country at over 7.08% for residents. State and federal tax rates combined create an effective tax rate 23.37% based on median annual income of taxpayers.
If you’re a couple filing jointly in Massachusetts, you’re facing the highest total effective tax rate in the U.S. at 23.51%. Individuals pay the second-highest rate at 23.23%. This state boasts the highest median annual income in the country, which pushes their effective federal tax rate higher. Both individual filers and couples filing jointly may see an effective federal tax rate above 18%.
Hawaii has an effective state tax rate of 6.22% for individuals and 6.36% for couples, which places it in the top five most expensive states when it comes to residents’ tax burden. The pandemic has also caused tax revenue to crash due to a drop in tourism, and residents may have to shoulder that extra burden.
Connecticut has a high total effective tax rate for residents in part because of its above-average effective state tax rate of 4.77% for both individuals and couples. Rising income tax rates in the state have led to some people who make more than $2 million a year finding a way to file as a non-resident or part-time resident, which has caused a decrease in tax revenue for the state.
Maryland’s effective state tax rate is 4.23% for individuals and 4.29% for couples. But high local taxes in this state’s counties can bump up the tax bill for state residents.
For New Yorkers, it’s not just about federal and state tax rates, although they are a significant contributor to residents’ tax bills. Individuals have a total effective tax rate of 21.92% while couples face a rate of 21.41%. Unfortunately, homeowners also have to deal with the seventh-highest property taxes in the country, and living or working in New York City can add an additional tax burden for both individuals and couples.
Minnesota’s effective state tax rate is 4.5% for individuals and 4.66% for couples, which is why the state has such a high tax burden. Minnesota’s progressive tax rate (which increases tax rates as taxable income goes up) reaches 9.85% for individuals earning more than $171,000 or couples earning almost $285,000.
Growth in Utah’s economy may be a contributing factor to the higher tax rates for its residents. It’s effective state tax rate of 4.95% puts it in the top 10 of state tax rates for both individuals and couples filing jointly. In fact, Utah collected almost $14 billion in tax revenue in 2021, which was a record for the state.
One reason for Virginia’s effective state tax rate of 4.68% for individuals and 4.95% for couples may be due to the set-up of its progressive tax structure. Annual income over just $17,000 is taxed at the highest rate of 5.75% for residents. Compare that to nearby Maryland, where a 5.75% tax rate doesn’t kick in for income until it goes over $300,000.
In addition to an effective total tax rate of 21.14% for individuals and 21.73% for couples, property taxes have a serious effect on the tax burden for New Jersey residents. The state has the highest average property taxes in the country.
Delaware’s effective state tax rate is 4.45% for individuals and 4.96% for couples filing jointly, which is why it’s one of the more expensive states for taxpayers. However, the state doesn’t have a sales tax, which could offset some income tax.
While this state’s effective tax rate of 4.73% for individuals or couples may not seem that bad, Illinois has a flat tax rate, meaning everyone pays the same rate no matter their income. This can hit lower- and middle-class taxpayers harder than wealthy residents when applied across the board. The state also has a large tax burden on property owners with the second-highest average property tax in the country.
One contributing factor to Iowa’s high effective state tax rate of 4.1% for individuals and 5.01% for couples is taxes from school districts in addition to state-wide taxes. State and local sales taxes also could be a contributing factor.
One reason for Georgia being on this list is the way its tax brackets are formed. Individuals face an effective tax rate of 4.34% for state taxes while couples may see a 4.6% effective rate. However, it doesn’t take residents long to reach the highest tax bracket at a very low number of $7,000 in annual taxable income for individuals or $10,000 for couples. Once you reach that income level the tax rates can jump to 5.75%.
Like Illinois, Kentucky uses a flat tax rate of 5% for all residents. But that puts an additional burden on lower- and middle-class taxpayers compared to wealthier Kentucky residents. Individuals have a 20.36% total effective tax rate, while couples see 19.98% total effective tax rate.
If these numbers seem daunting, know that there are ways to mitigate the tax burden on the money you make. Talk to a tax professional or use the best tax software available to check if there are areas where you can itemize deductions to find additional write-offs.
Take a look and see where your hometown lands on the list of income tax rates by state and then see if there’s something you can do to manage money and cut back on your state or federal tax bill.