Property Taxes by State – A Complete Rundown

31.12.2021
Milena

Property tax is the amount you pay to authorities on personal or business properties you own. How much you pay depends on several factors, one of which is your state of residence. That makes it essential to know the property taxes by state next time you plan to invest in real estate. Taxes on properties are a significant source of income for most states. They don’t vary depending on the state only, either. Specific counties may have higher or lower taxes compared to the state’s average effective tax. Would you like to learn more about the property taxes in your state? If so, scroll down.

Effective Property Tax Rates by State

In the US, the median owner-occupied home value is $222,041, with an effective tax rate of 1.09%. Hence, the median property taxes paid for such homes are about $2,412.In the table below, we will go over each state and see how it compares to the American median figures. We will also analyze the states with the highest property taxes alongside the jurisdictions with the lowest property taxes in the US. Please note that in the next table, the focus is on personal property taxes by state.

Median Property Tax Rates by State

Effective Property Tax Rate for Owner-Occupied Home

New Jersey has the highest property taxes by state in the US. Still, the Garden State remains among the best places to flip houses in America. Its effective property tax rate is 2.47%, not much higher than the 2.27% in Illinois. New Hampshire rounds up the list of the top three states with the highest property tax. New Hampshire’s effective tax rate is 2.18%, with Connecticut the only other state with a property tax of over 2% (2.14%).

Hawaii meanwhile is at the other end of the spectrum in this category. With an effective property tax of only 0.28%, the state boasts the lowest property taxes by state. Alabama and Louisiana are the two other states with the lowest property taxes. Their effective rates for a median owner-occupied home are 0.41% and 0.51%, respectively.

Median Property Taxes

With such a high tax rate, it’s unsurprising that New Jersey also has the highest median property taxes paid. The median amount paid on property tax in this state is $8,362. You will notice that New Jersey’s median taxes are significantly higher than those in Connecticut and New Hampshire. These two hold the 2nd and 3rd highest median property taxes by state. Their residents pay median amounts of $5,898 and $5,701 for a median value owner-occupied home.

People in Alabama, West Virginia, and Arkansas, by contrast, pay the lowest median amount on property taxes. Alabama is among the states with the lowest property tax, so it’s expected to see it here. West Virginia and Arkansas have low median home value, which affects the median tax amount.

Alabama’s residents pay only $587 on property taxes for a median-value home. That’s around 10 times less than the amount paid by homeowners in Connecticut and New Hampshire. These figures are perfect for illustrating the considerable difference that exists among the property tax rates by state in the US. In West Virginia and Arkansas, the median amounts people pay are $698 and $798, respectively.

Hawaii, D.C., and California have the highest median home value of houses occupied by the owner. Their respective median values are $615,300, $601,500, and $505,000. With median home values of $119,000, $119,600, and $127,800, Mississippi, West Virginia, and Arkansas ended up on the opposite end of the list.

Other Essential Property Tax Trends

Besides our list of property taxes by state, we also analyzed a few other essential trends associated with this type of tax. In the section below, we will go over the importance and effects of property tax in each state. Learn how vital of an income source this tax is as well as what percentage of personal income it represents.

Before we move on, however, let’s first see the stats for the USA as a country. The state property tax contributes 30.08% towards the overall income. The total property tax as a percentage of state-local revenue is 16.93%, while the property tax percentage of personal income stands at 3.12%. Finally, the per-capita property tax in the US is $1,618.Scroll down to find all about these vital property taxes by state segments.

The Importance and Effects of Property Taxes by State

Property Tax as Source of General Revenue

In our property taxes comparison by state, New Jersey, Connecticut, and New Hampshire have the highest median property taxes paid. So, it makes sense that property tax represents a significant share of the general income of these states. In this category, the positions are reversed as New Hampshire has the highest percentage of 63.66. Connecticut comes in second with property tax representing 59.85% of its revenue. Finally, New Jersey and its 59.07% hold the third place. Arkansas’ property tax is only 11.36% of the state’s income, placing the jurisdiction at the bottom.

Property Tax as a Percentage of State-Local Revenue

New Hampshire, New Jersey, and Connecticut top several categories in our property tax ratings by state. They hold the 1st, 2nd, and 3rd position as states with the highest total property tax as a percentage of state-local revenue. Their percentages are 38.59, 29.22, and 26.39, respectively. Alabama holds the last place here as its total property tax collected represents only 7.09% of the state-local revenue.

Property Tax as a Percentage of Personal Income

In New Hampshire, the property tax represents 5.66% of the average personal income in the state. This makes New Hampshire the state with the highest property tax as a percentage of personal income. About 5.14% and 5.05% of the personal income in Vermont and New Jersey goes to covering property taxes. Considering that New Hampshire and New Jersey have the highest average property taxes by state, these stats aren’t unexpected. Just like Alabama scoring the last place didn’t come as a surprise either. In this state, property taxes paid represent about 1.44% of the personal income of residents.

Per Capita Property Tax

D.C. leads the way in the property tax per capita by state category with $3,500. New Hampshire and New Jersey, naturally, follow with per capita property taxes of $3,310 and $3,277. Connecticut is the only other state whose per capita property tax by state is over $3,000 ($3,020). Alabama, Oklahoma, and Arkansas have the lowest property tax per capita. In Alabama, the per capita amount paid is only $582, while in Oklahoma and Arkansas, it’s $731 and $741, respectively.

States Without Property Taxes

Owning property in any of the states plus the District of Columbia always comes with a tax burden. Those who were hoping to find states without any property taxes will be disappointed. Property tax isn’t like corporate tax, as we know that six states have no corporate income tax whatsoever. There are, however, several states with no property tax for seniors.

  • South Dakota – Offers state property tax relief programs alongside exemptions for low-income residents over 70.
  • Washington – Has property tax exemptions of seniors aged 61 or older.
  • Florida – Some residents and seniors may be eligible for either property tax break or exemption.
  • Alaska – Senior homeowners over 65 don’t pay property tax on the first $150,000 of their home’s total value.
  • South Carolina – Non-military seniors aged 65 or older don’t pay tax on homesteads.
  • Georgia – Certain retirees may qualify for deferrals or exemptions on this type of tax.
  • Hawaii – Residents aged 65 or older don’t pay property tax on the first $140,000 of their home’s value.
  • Alabama – One of the states with no property tax for residents of over 65, although county taxes may still apply.
  • Mississippi – Residents over 65 get exemption on the first $75,000 on their homestead’s value.
  • South Carolina – Offers property tax exemption on homes of non-military seniors over 65.
  • New York – Homeowners with an annual income of up to $29,000 and over 65 qualify for a 50% property tax exemption.
  • Texas – Houston area offers tax exemption on the first $160,000 of the home’s value to seniors over 65.
  • New Hampshire – Besides having the highest property tax rate by state, New Hampshire offers exemptions for residents aged 65 or older.

Some states offer exemptions and breaks for disabled people and/or disabled veterans. These regulations vary, so it’s best to check official state websites for more information on them.

Property Tax on Business Property

When someone says property tax, they usually refer to taxation on personal real estate. Still, business properties get taxed too. In the fiscal year 2017, the total state and local business property taxes generated $287.4 billion.

Each jurisdiction has individual commercial property taxes by state that affect the total business tax burden in that specific area. In Massachusetts, for example, businesses are taxed with $2.60 per $1,000 of tangible property. In Wyoming, companies pay 11.5% commercial property tax on industrial estates and 9.5% on commercial and other properties.

Minnesota is another example of how taxation on business properties can vary. In this state, the minimum commercial tax fee depends on the total value of the property, payroll, and sales of the business. Meaning, while there isn’t a specific commercial property tax, properties still affect the overall tax burden companies face in Minnesota.

Property Tax — Red States vs Blue States

When analyzing the property tax rates by state, it’s noticeable that blue states have higher effective taxes on properties. Among the 10 states with the highest effective tax rate on median owner-occupied homes, seven are Democrat. The top four states with the highest property taxes are blue.

The situation is different when focusing on the states with the lowest property taxes. Here, six among the leading ten states are Republican. So, the conclusion is that red states tend to have looser taxation on personal properties.

According to the latest uninsured rates by states, Republican states also have more uninsured residents. Red states are also the most federally dependent states in America. So, having low property taxes doesn’t necessarily place them in a better position than blue states.

Final Words

With the property taxes by state drastically varying, homeowners can save lots of money just by relocating. New Jersey, New Hampshire, Illinois, and Connecticut have the highest property taxes in the US. So, those who want to avoid paying thousands of dollars in tax on properties could consider moving to tax-friendlier locations. Some of those would be Alabama, Arkansas, Hawaii, and Louisiana, courtesy of their low property tax. 

References: WalletHub, Lincoln Institute, Real Wealth Network

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