Property Taxes by State: The Latest Data for 2023
Unlike income or sales taxes which do not exist in some states, property tax is levied in all 50 states. It applies to all immovable property and land, as well as personal properties like cars, trucks, and equipment. In fact, property taxes are the biggest source of state and local revenue in the US, accounting for more than 70% of local tax collections.
As you might know, not all homeowners or investors pay the same taxes simply because not all properties are built in the same location, and, coast to coast, property taxes by state varies greatly. Read on for a comprehensive state-level overview of property taxes in the US, revealing median rates, the states with the highest and lowest property taxes, as well as the average amount of taxes actually paid.
Property Taxes by State – The Highlights
In 2020, property taxes generated 32.2% of all state and tax collections.
At 2.49%, New Jersey has the highest average property tax.
Hawaii is the state with the lowest property tax rate at 0.28%.
14 out of 18 boroughs in Alaska impose a property tax.
The effective property tax rate in the US is 0.9%.
Property Tax Rate by State – An Overview
|State||Average State Tax Rate||Median Home Value||Annual Tax on Median Value Home in State||Annual Tax on Median Value Home in the US ($440,300)|
|District of Columbia||0.56%||$811,792||$4,546||$2,466|
(Roofstock, FRED, Zillow)
Real Estate Taxes by State and How They Work
Property tax in the US is not only a major source of tax revenue for local governments, but it also helps fund the provision of public services. In fact, in 2020, property taxes accounted for nearly a third (32.2%) of all state and local tax collections and, as such, are the number one source of tax revenue.
Owning a home, building, or any tangible property means actively and passively participating in the functioning of the community where that property is located. And the size of the annual contribution you will be making to the state depends on your home's assessed value, or fair market price, and the current property tax by state.
But what you pay in property tax also depends on the type of land and the property's structure. For instance, vacant land will most likely have lower real estate taxes because its market value is lower. That’s why the most certain way to know how much you will pay is to multiply the state tax rate by the assessment ratio (the taxable portion of the property value) and the property value.
Finally, property tax rates in most states change every year or every five years, including the mill rate imposed by municipalities, so if you’re planning to buy real estate, your first point of cost assessment should start from there.
States With the Highest Property Tax
Some jurisdictions need more for local schools, utilities, and government operations, while others need less. In fact, the rate you are charged is typically the total of the rates for the individual services provided by the municipality or otherwise known as the mill rate (effective property tax rate).
And, of course, since property taxes are assessed as a percentage of the property's value, it’s somewhat logical for places with higher prices, especially housing prices, to pay more for owning a property.
New Jersey, for example, is one of the most densely populated states in the country, has a significantly high cost of living, and levies one of the highest sales taxes by state. Consequently, it shouldn’t come as a surprise that it’s also one of the states with the highest property taxes, with an average rate of 2.49%. Here’s the full list of the states that leverage the highest property taxes:
New Jersey 2.49%
New Hampshire 2.18%
New York 1.72%
Rhode Island 1.63%
The above ranking is based on the average property tax rate imposed at a state level. So, for example, for a median home valued at $484,393, a homeowner from New Jersey would pay a total of $12,061 a year, while a homeowner from Rhode Island, which has a significantly lower tax rate, would pay $7,272 for a median home valued at $446,155.
(Roofstock, FRED, Zillow)
States With the Lowest Property Tax
Believe it or not, of all 50 states, Hawaii has the lowest average tax rate on property, currently standing at 0.28%. It has a nearly 50% lower property tax rate than the District of Columbia, Delaware, and South Carolina. As seen from another perspective, a person living in a $1 million worth of home in Honolulu pays around $3,000 annually for property tax, while for a property of the same value, a person from New Jersey pays almost $24,000. Below is a list of the other states with low property tax:
District of Columbia 0.56%
South Carolina 0.57%
West Virginia 0.58%
(Roofstock, FRED, Zillow)
What should be noted here is that while Hawaii may be property tax heaven, it does not come without a cost. In fact, the government compensates for the fact that they have the lowest property taxes by state with the general excise tax, which is levied on almost everything. The GET presents a significant burden on people with lower income who are not homeowners and do not, in any way, benefit from the fact that their state has the lowest property tax.
The case of Delaware and South Carolina, both of which have an average tax rate of 0.57%, is similar. To compensate for the low property tax, South Carolina has a pretty high sales tax rate of 6%. Also, Delaware has no sales tax and is one of the lowest property tax states but is also one of the few—seven states, to be exact—that levy gross receipt tax.
Wyoming, which is popularly known as the most tax-friendly state, also makes an interesting case. It is not only the tenth state with the lowest tax rates on property, but also has a reduced level of property assessment. Instead of levying tax on the full 100% value of a property, Wyoming residents are taxed on only 9.5% of the value.
In addition, it’s one of the states with no income tax, does not impose taxes on real estate sales, and has no excise tax. The downside of all these tax reliefs is that the revenues of Wyoming are extremely volatile.
(State of Wyoming Legislature, University of Wyoming Extension, Tax Foundation, Honolulu Civil Beat)
Effective Property Tax Rate by State
Another important aspect in regard to property tax is the effective property tax rate or the average amount of residential property tax that is actually paid. In 2021, for example, an analysis of nearly 87 million single-family homes showed that nationwide, a total of $328 billion was collected based on property tax.
This number is only 1.6% higher compared to what homeowners paid in 2020, or $323 billion. In 2019, for instance, the amount collected from property tax was 5.4% higher.
According to the same analysis, state property taxes levied on single-family homes in the US in the past five years increased by only 1.8%, even though home prices in many US states jumped by more than 16%. The effective tax rate meanwhile amounted to 0.9%. In 2020, for instance, the effective property tax rate was a bit higher, or 1.1%.
This means that the number of homeowners who paid their residential dues to the state has reduced by 0.2%. Moreover, when it comes to the effective rate, the ones with the highest property taxes by state are:
New Jersey 1.73%
On the other end of the spectrum are the states with the lowest effective property tax rate. And these are:
Finally, it should be noted that the effective tax rates were reduced significantly since prices of homes across the country spiked much faster than property taxes did. In fact, the median value of homes increased by over 10%, which did not stop buyers from getting their dream houses, especially since mortgage rates on homes were quite affordable.
States With no Property Tax – The Case of Alaska
Unfortunately, there are no states which do not levy property tax. In the US, property tax is one of the most significant contributors to the overall state income. Money collected from property tax is used to help governments ensure the servicing of law enforcement, infrastructure, education, transportation, parks, water and sewer service improvements, and the like.
However, the state of Alaska, which is the largest in surface area but has one of the lowest population densities of 1.3 people per square mile, does have some areas where it does not levy property tax.
And while there are no states without property tax in the US, large areas of Alaska are not subject to property tax mainly because the smaller incorporated areas do not have sufficient tax base to support a claim for levying such a tax. In reality, 11 Alaskan cities levy property tax, or 14 out of 18 boroughs. The following Alaskan boroughs do not impose tax on property:
Aleutians East Borough
Lake and Peninsula Borough
Northwest Arctic Borough
Veterans Property Tax Exemption by State
In the US, veterans may be eligible for property tax exemption for their principal place of residence. However, whether or not they are entitled to property depends mainly on the type of disability, which is estimated from 10% to 100%, the state, county, and even the city they reside in.
And, while all 50 states offer some form of property tax exemption for veterans, a total of 17 states provide full or 100% exemption. Here is the list of states that exempt veterans from paying property tax in the United States:
Naturally, other states are also considerate towards citizens who have served the country. They either offer exemption for up to a certain amount or a significant 70% or allow this exemption to be transferred to the spouse.
For instance, in South Dakota, a paraplegic veteran will be entitled to full property tax exemption. Similarly, in Ohio, a veteran can get up to $50,000 tax exemption which for a state where the median home value is 215,306 and carries an annual property tax of $3,359, means this person will likely be fully exempt from paying property tax.
Property Tax Ranking by State – The Bottom Line
Prospective homeowners often fail to calculate property taxes when considering how much living in the comfort of their home would actually cost. And this specifically goes for states that levy some of the priciest property taxes, which could very well add one or two zeros to the annual ownership cost.
This is why it is crucial for potential buyers to factor in property taxes and the respective rates by state. Ultimately, whether or not you can afford to pay the tax on what you own makes all the difference in whether or not you are ready to undertake the financial commitment that goes with being a homeowner.
FAQs on the Property Tax Rate by State
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