Let’s start with some clarification.
Property taxes and real estate taxes are essentially the same thing. While the IRS refers to the levies imposed on immovable land as real estate taxes, most people use the two terms interchangeably. So will we. But not without making one important distinction – personal property taxes differ from real estate and property taxes.
Personal property taxes are tariffs charged on moveable properties, including cars, business equipment, boats, and art. These items are taxed differently and are not subject to our article.
In this piece, we focus on the states with the lowest property taxes, interpreting the term property tax to encompass the tariffs homeowners pay annually based on the assessed value of their real estate.
Listing the Lowest Property Tax States
There are several reasons why this data could be of major significance to you.
Property taxes could be gobbling up a huge chunk of your income, leaving you with less for your home payment, bills, savings, and investments. The information could also help you know how to maneuver when property taxes are due.
Either way, read on to find out the states with the lowest property taxes in the US.
The ranking is based on property tax data shared by Roofstock in August 2022. The median household income figures are sourced from statistics aggregator World Population Review.
- Effective property tax rate: 0.280%
- Typical home value: $809,600
- Annual taxes paid on homes priced at typical value: $2,391
- Median annual household income: $83,173
According to Roofstock data, Hawaii has the lowest property taxes in the USA. Home insurance costs are also the lowest in the country.
However, it still has the highest typical home value of all the 10 states featured in this list, meaning that residents could still be slapped with a hefty tax bill.
Hawaii having the lowest property taxes is a surprise considering it perennially ranks among states with the highest cost of living, according to data shared by the Bureau of Economic Analysis (BEA).
- Effective property tax rate: 0.410%
- Typical home value: $183,100
- Annual taxes paid on homes priced at typical value: $751
- Median annual household income: $52,035
Not only do homeowners in Alabama enjoy the second-lowest property tax rates in the country, they also benefit from home prices anchored below the typical home value in the US which stood at $356,026 in October 2022.
The state is also one of the most affordable places to live in the country. BEA data shows it had the fourth-lowest cost of living in 2021 at $39,657 a year.
Only Mississippi ($36,445), Oklahoma ($38,650), and Arkansas ($39,044) had a lower cost of living.
- Effective property tax rate: 0.510%
- Typical home value: $528,200
- Annual taxes paid on homes priced at typical value: $2,694
- Median annual household income: $75,231
Although the effective property tax rate in Colorado is low, that is dampened by high home prices which attract more taxes.
This is reflected in the hefty typical tax burden ($2,694), which is the second-highest in our list behind Utah ($3,224).
However, the median household income in Colorado is higher than in most states which should alleviate the tax bill.
- Effective property tax rate: 0.550%
- Typical home value: $199,500
- Annual taxes paid on homes priced at typical value: $1,097
- Median annual household income: $50,800
Like Alabama, Louisiana is another state where residents enjoy both low property tax rates and home prices below the national average.
Another thing residents of Louisiana enjoy is the lower prices of basic commodities and services. The average cost of living in Louisiana was $42,294 in 2021. The tenth-lowest in the country.
According to the Economic Policy Institute Family Budget Calculator, a family of four living in Louisiana can expect to spend $725 on housing, $735 on food, and $1,164 on transport.
Nonetheless, Louisiana still has the second-highest poverty level in the country – 17.8%. Mississippi has the highest at 18.7%.
5. South Carolina
- Effective property tax rate: 0.570%
- Typical home value: $252,300
- Annual taxes paid on homes priced at typical value: $1,438
- Median annual household income: $54,864
South Carolina and Delaware have the same property tax rates, but, the former’s lower typical home value gives it the edge over the Mid-Atlantic state.
In a state with one of the highest poverty levels in the country (13.8%), the modest typical home values go a long way in keeping property taxes low.
This comes in handy because South Carolina’s median household income is lower than most states in this list.
- Effective property tax rate: 0.570%
- Typical home value: $327,300
- Annual taxes paid on homes priced at typical value: $1,866
- Median annual household income: $69,110
Due to the high house prices in the state, homeowners in Delaware pay more in property taxes.
The high cost of living further compounds this. In 2021 Delaware had the tenth-highest cost of living at $51,113 (11th if you count Washington, DC).
However, residents can take solace in the fact that the median household income is relatively high. Similarly, the state does not levy a sales tax which is another major positive.
7. West Virginia
- Effective property tax rate: 0.580%
- Typical home value: $122,300
- Annual taxes paid on homes priced at typical value: $709
- Median annual household income: $48,037
West Virginia is an interesting case. The low effective property tax rate and the moderate home prices together could potentially translate into the lowest home prices in the country.
At $41,153, the state’s cost of living was among the lowest in the country. According to the Economic Policy Institute Family Budget Calculator, a family of four in the state can expect to spend $805 on housing, $709 on food, $1,156 on transport, and $2,253 on healthcare per month.
That said, West Virginia had the third-highest poverty level (15.8%) in 2020, behind Mississippi (18.7%) and New Mexico (16.8%).
- Effective property tax rate: 0.600%
- Typical home value: $410,100
- Annual taxes paid on homes priced at typical value: $2,461
- Median annual household income: $62,043
Nevada is another state where the low property tax rate is suffocated by high home prices.
In addition to having the third-highest typical home value out of all ten jurisdictions in this list, the western state also struggles with high poverty levels. According to the United States Department of Agriculture Economic Research Service, poverty levels in the state stood at 12.5% in 2020.
The burden should nonetheless be eased by the modest median household income.
- Effective property tax rate: 0.630%
- Typical home value: $511,800
- Annual taxes paid on homes priced at typical value: $3,224
- Median annual household income: $74,197
Aside from having the highest property taxes out of all 10 states in our list, Utah has the second-highest effective tax rate and one of the highest typical home values.
The high property rates contrast with the cost of basic commodities and services. BEA data shows that the cost of living in the state in 2021 was $42,653, which is somewhat moderate compared to the property rates.
On the brighter side, the median household income is the third-highest on this list.
- Effective property tax rate: 0.610%
- Typical home value: $292,500
- Annual taxes paid on homes priced at typical value: $1,784
- Median annual household income: $65,304
Even though Wyoming has the highest effective property tax rate out of all states in our list, there are several upsides to living in the state.
It has one of the lowest sales taxes in the country (4% as of October 2022). BEA data also shows the state had a moderate cost of living in 2021 at $47,832.
Official data also shows the state has the seventh-lowest poverty rate in the country. At the same time, a median household income of $65,304 is also relatively good.
States With the Highest Property Taxes
It goes without saying that if you are curious about the lowest property tax states, you would also be interested in knowing those with the highest rates.
The most plausible reason is that property taxes shape local housing markets by influencing the cost of building homes leading to higher prices.
We balance the scale by looking at the areas with the highest property tax below.
New Jersey has the highest property tax rates in the US, with an average tax rate of 2.490%. The average spent on property taxes in the Northeastern state was $10,707 in 2022.
Illinois comes second with an average tax rate of 2.270%. The average spent on property taxes in the Midwestern state was $5,550 in 2022.
New Hampshire features in the third position with an average tax rate of 2.180%. The average spent on property taxes in the northern state was $8,618 in 2022.
Connecticut (2.14%), Vermont (1.9%), Wisconsin (1.85%), Texas (1.8%), Nebraska (1.73%), New York (1.72%), and Rhode Island (1.63%) complete the set of the top 10 states with the highest property tax.
What Is the National Average Property Tax in the US?
The national average tax rate in the United States was 1.1% in 2022, while the average spent on property taxes was $3,508.
There are numerous benefits of living in states with a low property tax.
It becomes easier to qualify for mortgages and to live on a fixed income. It also allows sellers to fetch a better price on their properties.
If you are not lucky enough to live in one of the low property tax states, there is no need to worry because there are a number of strategies you can use to lower your bill.
This includes familiarizing yourself with how property taxation works and applying for tax exemptions. It is also recommended that you avoid sprucing up your home and making unnecessary structural changes until your home is assessed.
When you do that, you can save more and channel the funds towards other needs.
Hawaii. The sunny state has the lowest effective property tax rate in the country. However, that should not be misconstrued as a lower cost of living. That is one of the most expensive places to live.
The states with the lowest property taxes are:
- South Carolina
- West Virginia
The highest property tax states are:
- New Jersey
- New Hampshire
- New York
- Rhode Island
Unfortunately, there are no states without a property tax. All states charge property taxes. This is because the stream accounts for approximately half the revenue collected by local governments. The proceeds are used to fund essential government services such as schools and police departments.