State and local taxes (SALT) are a frustrating part of living in a high-tax locale. Before the passing of the Tax Cuts and Jobs Act at the end of 2017, which ushered in sweeping tax legislation overhaul, Americans could deduct state and local taxes, including income and property taxes, from their federal income taxes. Under the new tax law, that deduction has been capped at $10,000. This change will disproportionately affect residents who pay high state and local taxes.
To investigate this issue further, SmartAsset looked at local tax data to find the cities where residents are most likely to pay SALT. We compared 114 American cities across six factors. Specifically, we looked at estimated state and local income taxes owed for the average household, effective state and local income tax rates, homeownership rates, estimated annual property taxes, effective property tax rate and percent of households with incomes of at least $150,000. Check our data and methodology section below to see where we got our data and how we put it together to create our final rankings.
- California taxes hurt – Five of the top 10 cities where residents are most likely to pay SALT are in California. These taxes tend to be highest in high-income California cities. Fremont, San Jose, Irvine and San Francisco ranked in the top 10 and all rank in the top five for concentration of high-earning households.
- Nevada residents are sitting pretty – At the bottom of our rankings are cities from states like Nevada, Florida, Arizona and Louisiana. In particular, Nevada cities do not have to worry too much about SALT. Nevada has no state income tax, and its property taxes are also affordable.
1. Yonkers, New York
Residents in Yonkers pay both high income taxes and property taxes. According to our data, the average Yonkers resident can expect to pay nearly $3,700 per year in state and local income taxes. In particular, New York state income taxes are quite burdensome making up over $3,100 of that $3,700.
As mentioned, Yonkers residents get no relief when it comes to property taxes. The city ranks first in the data set for annual median property taxes, at $7,977.
2. Fremont, California
California’s income taxes are high, as are its home values. In total, we estimate the average resident in Fremont would pay $8,400 per year in state and local income taxes, which is roughly 7% of the area’s median income. And thanks to those high home values, the average homeowner in Fremont pays nearly $6,400 per year in California property taxes.
However, relative to home value, Fremont homeowners actually get a pretty good deal on their property taxes. The effective property tax rate in Fremont is only 0.73%.
3. (tie) San Jose, California
San Jose takes third. We estimate the average resident here would pay over $6,500 in state and local income taxes. When you include local property taxes, the average homeowner pays nearly $13,000 per year in total state and local taxes.
For many residents, the situation is even worse (or better depending on how you look at it). Just over 32% of all households in San Jose take home at least $150,000 per year and can expect to pay even more in federal income tax.
3. (tie) Aurora, Illinois
Aurora residents pay a relatively low amount in local and state income taxes. In total, we estimate Aurora ranks 31st for effective state and local income tax rates. However, in all other metrics, Aurora ranks in the top 20 which is why it ranks in this top 10.
The city’s homeownership rate is above 64%, meaning most residents pay property taxes, and those property taxes are expensive. The average homeowners pays over $4,600 per year in Illinois property taxes, for an effective rate of 2.63%. In both of those metrics, Aurora ranks in the top 15.
5. Madison, Wisconsin
Madison residents pay one of the highest percentages of their incomes to local taxes in this study. The average resident pays roughly $3,500 per year in state and local income taxes, which is equivalent to an effective tax rate of 5.8%. In both of those metrics, Madison ranks in the top 15.
Homeowners here also don’t get any break on property taxes. The average homeowner pays 2.1% of their home’s value per year in property taxes, a top 10 rate.
6. Irvine, California
Irvine residents are in a similar position to Fremont residents. The local income taxes are high. The average resident shouldn’t be surprised to pay over $6,100 per year in state and local income taxes. Tack on an estimated $6,600 per year in property taxes and homeowners here will really be feeling the pinch.
Another factor to consider is the large proportion of high earners in Irvine. Just over 30% of households in Irvine earn at least $150,000 per year.
7. Portland, Oregon
Portland claims a top 10 spot largely due to high Oregon income taxes. We estimate the average resident pays nearly 7.3% of their income to state and local income taxes, the second-highest rate in our study.
Despite having the second-highest effective tax rate, when it comes to raw numbers Portland residents do not pay the most in state and local income taxes. Due to lower incomes compared to the California cities, the average Portland resident pays only the eighth-most in the study in local income taxes.
8. Arlington, Virginia
Arlington is full of residents hurt by local taxes. Thanks large part to high Virginia income taxes, the average resident pays nearly $5,900 per year in state and local income taxes. That is over 5.3% of the median income. In each of those metrics, Arlington ranks in the top 20.
The average homeowner also pays a substantial amount each year in property taxes. Data from the Census Bureau shows the average homeowner spends just under $6,000 per year in Virginia property taxes. That’s a top 10 rate.
9. San Francisco, California
San Francisco, a city famed for its high earners, takes ninth. The average resident can expect to pay nearly $6,700 per year in state and local income taxes, equal to 6.4% of the median income.
High home values also mean homeowners can expect to pay a high dollar amount in property taxes. The average San Francisco homeowner pays nearly $6,300 per year in property taxes, a top five rate.
10. Huntington Beach, California
Huntington Beach is no exemption when it comes to high California income taxes. The average resident here can expect to pay over $5,000 per year in state and local income taxes. That means an effective state and local income tax rate of nearly 6%.
The city also has quite a few high earners who can expect to pay even more each year in income taxes. According to Census Bureau, estimates 3.45% of households in Huntington Beach earn at least $150,000 per year.
Data and Methodology
In order to rank the cities where residents are most likely to pay SALT, we looked at data for 114 cities. Specifically we ranked the cities across the following six metrics:
- Effective state and local income tax rate. This is the effective state and local income tax rate for a resident earning the median income. Data comes from SmartAsset’s income tax calculator and the Census Bureau’s 2016 1-year American Community Survey.
- Estimated state and local income tax. This is the estimated state and local income tax paid by the average resident earning the median income. Data comes from the Census Bureau’s 1-year American Community Survey.
- Annual property taxes. This is the annual median amount homeowners pay in property taxes. Data comes from the Census Bureau’s 2016 1-year American Community Survey.
- Effective property tax rate. This is the annual median property taxes divided by the median home value. Data comes from the Census Bureau’s 2016 1-year American Community Survey.
- Percent of high-earning residents. This is the percent of households earning at least $150,000 per year. Data comes from the Census Bureau’s 2016 1-Year American Community Survey.
- Homeownership rate. This is the percent of homes which are owner-occupied. Data comes from the Census Bureau’s 2016 1-Year American Community Survey.
First, we ranked each city in each metric. Then we found each city’s average ranking, giving a 1.5 weighting to both income tax figures and a half weighting to homeownership rate. Then we created our final score based on the average rankings. The city with the best average ranking received a score of 100. The city with the worst average ranking received a 0.
Tips for Paying Your Taxes
- Don’t wait for the deadline – The sooner you pay your taxes, the sooner you have access to your tax refund. By waiting until the deadline to file your tax return, you are also forced to wait until the deadline to get your tax refund. By filing earlier, you will get your refund earlier and have the chance to invest it. Depending on the size of your tax refund and how you invest it, you could earn hundreds of dollars.
- Limit your tax exposure – If you are saving for retirement look into how investing in a 401(k) or an IRA can help limit the amount of income taxes you pay. Also if you are a homeowner look into the mortgage interest deduction. If you take your time to do some research there are plenty of ways to lower your tax burden.
- Talk to an expert – It can be hard to know if you have made the most of all the potential tax breaks and credits available to you. In order to make sure you aren’t paying any more in taxes than you need to, you should consider talking to a financial advisor. They can help you limit your tax exposure while helping you plan for the future. If you are unsure of where to find a financial advisor, check out SmartAsset’s financial advisor matching tool. It matches you with a local financial advisor who meets your specific needs.
Questions about our study? Contact firstname.lastname@example.org.
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