Quick Answer
California, New York, and Hawaii are among the worst states for freelancers due to high state income tax rates (up to 13.3%, 10.9%, and 11% respectively) plus additional self-employment taxes. A freelancer earning $75,000 in California pays roughly $3,200 more in state taxes than the same freelancer in Texas or Florida.
Best Answer
James Okafor, Self-Employment Tax Specialist
Established freelancers earning $50,000+ who need to understand total tax impact across states
Which states hit freelancers hardest with taxes?
The worst states for freelancers combine high income tax rates with complex business requirements and additional fees that don't apply to W-2 employees. California, New York, and Hawaii top the list, but the impact varies significantly based on your income level.
The worst offenders: High-tax states
California leads the pack with a top marginal rate of 13.3% (including the 1% Mental Health Services Tax on income over $1 million). But even middle-income freelancers feel the pain. A freelancer earning $75,000 pays about 9.3% state income tax, plus they must pay quarterly estimated taxes and potentially register for additional local business taxes.
New York charges up to 10.9% state income tax, and New York City adds another 3.876% for residents. A freelancer earning $75,000 in NYC pays roughly $5,600 in combined state and city income taxes, compared to zero in states like Texas or Florida.
Hawaii imposes rates up to 11% and has one of the highest costs of living, making every tax dollar more painful. The state also requires business registration for most freelance activities.
Example: $75,000 freelancer in different states
Let's compare the total tax burden for a freelancer earning $75,000 across different states:
Hidden costs beyond income tax
The worst states for freelancers often pile on additional burdens:
States that are surprisingly tough
Oregon has no sales tax but charges income tax up to 9.9% with aggressive enforcement of business income reporting. New Jersey combines high income taxes (up to 10.75%) with complex local tax variations.
Massachusetts charges 5% income tax but has strict nexus rules that can trigger tax obligations for out-of-state freelancers working with Boston companies.
What you should do
Before relocating or choosing where to base your freelance business, calculate your total tax burden using actual numbers. Consider not just income tax rates but business fees, filing requirements, and local taxes.
Use our quarterly estimator to model your tax liability in different states and factor this into major life decisions.
Key takeaway: California freelancers typically pay $3,000-5,000 more annually in state taxes than those in no-tax states, making location a crucial business decision for high earners.
*Sources: [IRS Publication 505](https://www.irs.gov/pub/irs-pdf/p505.pdf), State Department of Revenue websites*
Key Takeaway: California, New York, and Hawaii can cost freelancers $3,000-5,100 more annually in taxes compared to no-tax states like Texas or Florida.
Tax burden comparison for $75,000 freelancer across different states
| State | State Income Tax | Additional Fees | Total Extra Cost vs. No-Tax State |
|---|---|---|---|
| California | $4,200 | $800 (LLC fee) | $5,000 |
| New York | $4,100 | $200 (filing fees) | $4,300 |
| Hawaii | $4,800 | $300 (registration) | $5,100 |
| Oregon | $4,500 | $100 | $4,600 |
| Texas | $0 | $0 | $0 |
| Florida | $0 | $0 | $0 |
More Perspectives
James Okafor, Self-Employment Tax Specialist
First-year freelancers who need to understand state tax basics before filing their first return
What new freelancers need to know about state taxes
As a first-year freelancer, you're probably focused on federal taxes, but state taxes can be equally important. Some states will take a big bite out of your freelance income, while others won't touch it at all.
The basic categories
No state income tax: Texas, Florida, Nevada, Washington, Wyoming, South Dakota, Alaska, Tennessee, and New Hampshire don't tax freelance income. If you live here, you only deal with federal taxes.
High-tax states: California (up to 13.3%), New York (up to 10.9%), Hawaii (up to 11%), and Oregon (up to 9.9%) will significantly impact your take-home pay. If you're earning $50,000 in California, expect to pay roughly $2,800 in state income tax.
Moderate-tax states: Most other states fall in the 3-7% range, which is manageable but still meaningful on a freelance budget.
Your first-year reality check
If you live in a high-tax state and earned $30,000 freelancing in your first year, here's what you might owe:
That difference could cover several months of health insurance premiums or business equipment.
What to do now
First, find out your state's tax rate and whether you need to make quarterly payments (most states follow federal rules). Second, start setting aside money for state taxes along with federal—typically 15-25% of your freelance income total depending on your state.
Key takeaway: New freelancers in high-tax states should budget an extra 5-10% of income for state taxes beyond their federal tax planning.
Key Takeaway: New freelancers in high-tax states should budget an extra 5-10% of income for state taxes beyond their federal tax planning.
Sources
- IRS Publication 505 — Tax Withholding and Estimated Tax
Reviewed by James Okafor, Self-Employment Tax Specialist on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.