High taxes can quietly erode paychecks, home equity and long-term nest eggs, especially in states where property levies and income brackets stack on top of steep living costs. I focus here on 15 high-tax states that can drain your savings, and on how recent policy moves and financial-planning guidance might blunt, or fail to blunt, that impact.
1) New York
New York combines high income taxes with some of the country’s most punishing local property bills, which is why it consistently appears among the states that “hit residents hardest” on lists of high tax burdens. The state’s homeowners have been especially exposed because federal limits on state and local tax deductions made it harder to offset those costs. Reporting on a new federal cap for state and local tax deductions describes how a higher ceiling could finally let New Yorkers write off more of their property taxes, directly reducing the out-of-pocket hit.
The stakes are visible in migration data. Coverage of New York State losing billions in income as residents leave the Empire State ties that exodus to people seeking lower-tax environments. When high earners move, they take tax revenue and local spending power with them, which can pressure remaining residents through service cuts or future tax hikes. For households that stay, the combination of steep levies and high housing costs can make it difficult to build emergency funds or invest for retirement.
2) Connecticut
Connecticut shows up near the top of rankings of “The Hardest States to Save Money,” where Connecticut is listed second, behind only Hawaii. That reflects a mix of elevated property taxes, income brackets that lean heavily on higher earners and a cost of living that magnifies every bill. The new federal approach to the state and local tax deduction, described in reporting on a higher SALT cap, is particularly relevant here because many Connecticut homeowners pay enough in property taxes to bump against prior limits.
When more of those property payments become deductible, the effective cost of owning a home in affluent suburbs could fall, at least for taxpayers who itemize. Yet the underlying reality remains that local governments still collect the same nominal tax, so the cash leaves a household budget before any federal benefit shows up. For families trying to save for college or pay down debt, that timing gap can be the difference between staying ahead of expenses and leaning on credit cards.
3) Hawaii
Hawaii is frequently cited as one of “The Hardest States” in which to build a cushion, with Hawaii ranked first in that list of places where it is toughest to Save Money. Separate social-media explainers on “States That’ll Drain Your Wallet in Taxes Places like California, New York, and Hawaii” underscore that the islands combine high income tax rates with steep housing and everyday costs. In that context, any federal change that lets residents deduct more of their state and local payments can matter, but it does not alter the underlying price of land or construction.
For many households, the real squeeze comes from trying to save for retirement or a down payment while paying island-level prices for groceries, fuel and utilities. When a large share of income goes to state taxes and property levies, there is less left to invest in diversified portfolios or to weather tourism downturns. That is why Hawaii often appears in discussions of states where even solid middle-class salaries struggle to translate into long-term financial security.
4) Vermont
Vermont is singled out in recent coverage as a place “known for its high tax rates, particularly in terms of property and income taxes,” with a progressive system that leans heavily on higher brackets. That description, attached to Vermont, helps explain why residents often feel squeezed even when home prices look modest compared with coastal metros. Property taxes fund local schools and services, but for retirees or lower-income homeowners, those bills can climb faster than income.
The new SALT cap framework is especially relevant in a state like this, where property taxes can rival mortgage payments. If more of those levies become deductible at the federal level, higher earners may see some relief, but renters and non-itemizers will not. The broader implication is that Vermont’s reliance on property and income taxes can discourage in-migration of wealthier households and complicate efforts by long-time residents to stay in their homes as they age.
5) California
California is a textbook example of how layered taxes and high living costs can drain savings. Short-form explainers on “5 States That’ll Drain Your Wallet in Taxes Places like California, New York, and Hawaii” highlight that California hits top earners with double-digit income brackets, while local governments add substantial property levies. Those burdens land on top of some of the nation’s highest housing prices, which means even modest effective tax rates translate into large dollar amounts.
Reporting on the new SALT cap notes that high-tax states stand to benefit most from a higher federal deduction ceiling, because more of those state and local payments can be written off. For California homeowners in expensive markets like San Jose or Santa Monica, that could soften the blow of annual property bills. Yet the underlying tax structure remains, so anyone who does not itemize, or who rents, still faces the same state-level drag on their ability to save for emergencies, education or retirement.
6) New Jersey
New Jersey regularly appears near the top of rankings of high-tax jurisdictions, and it is listed fifth in the “The Hardest States to Save Money” rundown that includes Hawaii, Connecticut, Vermont and California. Property taxes are the main culprit, with many homeowners paying five-figure annual bills that rival college tuition. The new federal SALT cap, described in reporting on expanded relief for high-tax states, is designed to let more of those payments be deducted, which can reduce the net cost for itemizing taxpayers.
However, the structure of New Jersey’s local finance means those property levies are unlikely to fall in nominal terms, because they fund schools, police and infrastructure. For younger families, that reality can shape where they buy homes or whether they leave the state altogether. The combination of high property taxes and income brackets can make it difficult to build equity and savings at the same time, particularly for households that also carry student loans or childcare expenses.
7) Illinois
Illinois stands out for heavy reliance on property taxes to fund local services, which can be especially painful in suburbs around Chicago. Social-media explainers on “States That, Drain Your Wallet, Taxes Places” mention Illinois alongside other high-burden states, underscoring that residents feel the cumulative effect of state income taxes, sales taxes and local levies. In that environment, any federal change that lets homeowners deduct more of their property payments, as described in coverage of a higher SALT cap, can modestly improve after-tax affordability.
Yet Illinois also illustrates how tax structure interacts with fiscal stress. Long-running pension obligations and budget gaps have limited the state’s ability to cut rates, so policymakers often lean on property assessments and fees. For residents, that means tax bills can rise even when home values stagnate, eroding the financial upside of ownership. Over time, this dynamic can push savers to relocate to neighboring states with lower overall burdens.
8) Massachusetts
Massachusetts combines relatively high income and property taxes with some of the country’s most expensive higher-education options, which can compound the drain on household savings. Reporting on the 8 most expensive US law schools that can drain your savings before you graduate underscores how elite programs, many clustered in the Northeast, require six-figure tuition commitments. When those degrees are pursued in a high-tax state, graduates can face large student-loan payments on top of steep state income brackets.
For families, the combination of saving for college, paying current property taxes and managing everyday costs can crowd out retirement contributions. Massachusetts residents who buy homes near major universities often pay premium prices, which magnifies the impact of local tax rates. The result is that even high-earning professionals can feel cash-strapped, particularly in the early years of their careers when loan balances are highest and tax deductions do not fully offset the burden.
9) Minnesota
Minnesota’s reputation as a high-tax state rests on a mix of progressive income brackets and significant property levies, especially in the Twin Cities metro. Coverage of the new SALT cap emphasizes that states with higher average property bills stand to gain the most from expanded federal deductions, and Minnesota fits that profile. Homeowners who itemize could see more of their local payments offset at tax time, which would reduce the net cost of owning a house in high-demand school districts.
Still, the state’s broader tax structure means that wages and investment income face relatively heavy taxation compared with many neighboring states. For savers, that can slow the pace at which taxable brokerage accounts and other non-retirement assets grow. Over a working lifetime, even modest differences in after-tax returns can translate into tens of thousands of dollars less in accumulated wealth, which is why Minnesota often appears in discussions of where taxes quietly chip away at long-term financial goals.
10) Maryland
Maryland’s high incomes and proximity to Washington, D.C., often mask how quickly taxes and housing costs can erode retirement planning. Guidance on retirement savings by age in 2025 stresses the importance of adjusting portfolios and contribution rates based on local cost of living and tax exposure. In a state where property taxes, county income surcharges and state brackets all bite into paychecks, retirees and near-retirees may need to save more aggressively just to maintain their target lifestyle.
For example, a Maryland household following age-based savings benchmarks might still fall short if they underestimate how much of their withdrawal stream will go to state and local governments. Taxes on distributions from traditional retirement accounts, combined with ongoing property levies, can accelerate portfolio drawdown. That is why financial planners often urge Maryland residents to model after-tax income carefully and to consider whether relocating to a lower-tax jurisdiction in retirement could preserve capital.
11) Maine
Maine’s combination of relatively modest incomes and significant property taxes can make it difficult for residents to build substantial savings, particularly in coastal communities where second-home demand pushes valuations higher. Reporting on the new SALT cap notes that homeowners in high-tax states stand to benefit from a higher federal deduction ceiling, and Maine’s property-heavy tax mix fits that description. For itemizing taxpayers, the ability to deduct more of those levies can reduce the effective cost of staying in long-held family homes.
However, many Maine residents are retirees or near-retirees living on fixed incomes, and not all of them itemize deductions. For those households, rising assessments can translate directly into higher annual bills without any offsetting federal relief. The result is a slow squeeze that can force difficult choices about downsizing, delaying medical care or cutting back on essentials, illustrating how state and local tax structures can undermine financial security even in relatively low-cost regions.
12) Oregon
Oregon often markets itself as relatively tax-friendly because it does not levy a statewide sales tax, but that can obscure the impact of high income brackets and property levies in urban counties. The framework described in reporting on a higher SALT cap is relevant here, because many homeowners in Portland and surrounding areas pay enough in property taxes to benefit from expanded federal deductions. For those who itemize, the ability to write off more of those payments can soften the blow of annual bills.
Yet Oregon’s progressive income tax structure means that high earners, especially in technology and professional services, still face significant state-level drag on their take-home pay. Without a sales tax, the state leans more heavily on income and property to fund services, which can leave savers feeling squeezed even when consumer prices look moderate. Over time, that pressure can influence decisions about where to start businesses or whether to remain in the state after retirement.
13) Rhode Island
Rhode Island is small, but its tax bite can feel outsized, particularly when layered on top of education costs. Coverage of the most expensive US law schools that can drain your savings before you graduate highlights how aspiring attorneys can leave school with heavy debt loads. For Rhode Island residents attending pricey programs in the Northeast, those obligations combine with state income and property taxes to create a challenging financial landscape.
Families who help fund those degrees may tap home equity or retirement accounts, then face ongoing local tax bills that limit their ability to rebuild savings. At the same time, young professionals returning to Rhode Island with large loans must navigate a job market that may not match the salaries of larger metros, while still paying state taxes on their earnings. That combination can delay milestones like homeownership and retirement investing, amplifying the long-term impact of the state’s tax structure.
14) Virginia
Virginia’s mix of state income taxes, local property levies and relatively high housing costs in Northern Virginia can significantly affect retirement planning. Guidance on what to do with your portfolio in 2025 emphasizes tailoring withdrawal strategies and asset allocations to local tax realities. For Virginians, that means recognizing how state taxes on pensions, Social Security (in some cases) and investment income will interact with ongoing property bills.
Retirees who underestimate that drag may withdraw too much too soon, accelerating the depletion of their nest eggs. Conversely, those who plan for Virginia’s tax bite can adjust by increasing pre-retirement contributions, shifting more assets into Roth accounts or considering partial relocation within the state to lower-tax counties. The broader lesson is that even a state perceived as moderate can quietly drain savings if households do not account for the full stack of levies they will face in retirement.
15) Pennsylvania
Pennsylvania presents a nuanced picture: some coverage of retirement destinations notes that “Some of the states that don’t tax 401(k) include Alaska, Illinois, Nevada, New Hampshire, South Dakota, Pennsylvania, and Tennessee,” highlighting that Some of the states treat 401 distributions more gently. Yet property taxes and local wage levies can still strain household budgets, particularly in older industrial communities where incomes lag. Reporting on a higher SALT cap for high-tax states suggests that Pennsylvania homeowners with substantial property bills could benefit from expanded federal deductions.
At the same time, separate discussions of “Retiring soon? These 5 states are quietly draining retirees” warn that hidden costs, including local taxes and healthcare expenses, can offset headline advantages like favorable treatment of 401 income. For Pennsylvanians, that means the absence of state tax on certain retirement accounts does not fully insulate them from fiscal pressure. Careful planning around property location, local wage taxes and healthcare spending remains essential to keep savings from eroding faster than expected.
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Julian Harrow specializes in taxation, IRS rules, and compliance strategy. His work helps readers navigate complex tax codes, deadlines, and reporting requirements while identifying opportunities for efficiency and risk reduction. At The Daily Overview, Julian breaks down tax-related topics with precision and clarity, making a traditionally dense subject easier to understand.
