Whether you're looking to buy a larger home for your growing family or a commercial investor searching for lower property costs, you might wonder whether there are any states without property taxes. Property taxes in the United States fund local services like schools, roads, parks, libraries, and public safety. They're administered by counties and sometimes by cities and school districts.
The amount you'll pay in property taxes varies between states — even between counties and cities within the same state. While it's a common misconception that there are states without property taxes, let's look at which states have low tax rates.
Understanding Property Taxes
Property tax bills in the U.S. are based on property value and local property tax rates. The reason tax liability differs by state and locality lies in the fact that property values in some areas are higher than in others. Local taxing entities also set different tax rates based on their unique budgetary needs.
Property tax bills are based on the assessed value of real property, but certain jurisdictions calculate personal property tax as well:
Real property taxes encompass land and any structures permanently attached, such as homes, outbuildings, and natural resources.
Personal property taxes cover impermanent property, such as vehicles, jewelry, stocks, and intellectual property.
Property owners in states without personal property tax pay less overall. If you're a commercial investor or simply a homeowner considering a move, these areas are among those with the lowest property tax rate.
Variation in Property Tax Rates
County assessors use local statutes and guidelines to determine property values. Some states require annual reassessments, while others reassess property values only when the property changes ownership or undergoes significant improvements. However, most counties reassess yearly.
Your property's assessed value may or may not equal your home's market value. That's why it's essential to appeal inaccurate property appraisals right away so you don't overpay your taxes.
Tax rates are a key factor in calculating property taxes. Combined tax rates from local entities determine your effective tax rate, which applies to your property's assessed value. Millage rates are one dollar per $1,000 of property value. These fluctuate year to year depending on changes to local budgets.
For example, a property valued at $1,000,000 with an effective property tax rate of 1.02% has an annual tax liability of $10,200.
High vs. Low Property Tax Rates
The average tax rate in the U.S. is 1.02%, with an annual property tax bill of $2,400. A state can have a higher-than-average tax rate without having the highest median tax bill. What you pay in property taxes ultimately depends on your area's:
Property values
Cost of living
Rate of economic growth
Tax savings programs
Texas has a median tax rate of 1.67%, and property owners pay a median annual tax of $3,971. Compare that to Pennsylvania, which has a higher tax rate of 2.81%, where the average resident spends just $3,063 in taxes annually.
California has a tax rate comparable to the national average at 1.21%. However, residents pay almost double the median national tax bill, with an annual tax liability of $4,683 due to increasing property values and property tax laws.
Furthermore, New York has one of the highest tax rates in the nation, at 2.39%, and one of the highest average tax liabilities, at $5,938.
Are There States With No Real Estate Property Tax?
Local governments rely on revenue from property taxes to fund public services; therefore, there is technically no state without property taxes. In every state, counties assess some form of property tax. However, some states have lower tax liability than others.
Arkansas residents enjoy a median tax rate of 0.84% with a median annual tax bill of $877. In Louisiana, homeowners pay $865 in property taxes, with a low tax rate of 0.91%.
States With the Highest and Lowest Property Tax Rates
This list displays states' median effective tax rates from highest to lowest. Our median effective tax rate calculates the percentage of property value that is paid in taxes after exemptions and reductions. Therefore, it is more accurate than a median tax rate that does not factor these in and inflates tax bills.
State | Median Effective Tax Rate | Median Tax Bill |
|---|---|---|
1. Connecticut | 3.14% | $6,162 |
2. New Jersey | 2.82% | $8,227 |
3. Pennsylvania | 2.81% | $3,063 |
4. New York | 2.39% | $5,938 |
5. Illinois | 2.35% | $4,715 |
6. Vermont | 2.11% | $3,843 |
7. New Hampshire | 1.91% | $5,895 |
8. Ohio | 1.80% | $2,396 |
9. Nebraska | 1.75% | $3,071 |
10. Texas | 1.67% | $3,971 |
11. Wisconsin | 1.58% | $3,346 |
12. Maine | 1.57% | $3,200 |
13. Iowa | 1.54% | $2,508 |
14. Rhode Island | 1.48% | $4,920 |
15. South Dakota | 1.45% | $2,732 |
16. Kansas | 1.43% | $2,595 |
17. Delaware | 1.41% | $1,362 |
18. Alaska | 1.37% | $3,874 |
19. Mississippi | 1.31% | $854 |
20. North Dakota | 1.30% | $2,659 |
21. Massachusetts | 1.23% | $5,844 |
22. California | 1.21% | $4,683 |
23. Missouri | 1.20% | $1,606 |
24. Florida | 1.14% | $2,953 |
25. Minnesota | 1.11% | $3,182 |
26. Georgia | 1.08% | $2,212 |
27. Michigan | 1.07% | $1,795 |
28. Maryland | 1.06% | $3,419 |
29. Kentucky | 1.02% | $1,031 |
30. Indiana | 0.99% | $1,691 |
31. Oklahoma | 0.97% | $1,269 |
32. Louisiana | 0.91% | $865 |
33. Virginia | 0.89% | $2,608 |
34. Washington | 0.88% | $4,284 |
35. New Mexico | 0.86% | $1,192 |
36. Oregon | 0.86% | $3,628 |
37. Arkansas | 0.84% | $877 |
38. Montana | 0.83% | $2,646 |
39. North Carolina | 0.82% | $1,615 |
40. Nevada | 0.80% | $1,782 |
41. District of Columbia | 0.77% | $4,081 |
42. South Carolina | 0.72% | $1,086 |
43. West Virginia | 0.72% | $607 |
44. Wyoming | 0.65% | $1,635 |
45. Tennessee | 0.64% | $1,206 |
46. Arizona | 0.56% | $1,666 |
47. Colorado | 0.55% | $2,283 |
48. Utah | 0.55% | $2,492 |
49. Idaho | 0.50% | $1,894 |
50. Alabama | 0.47% | $717 |
51. Hawaii | 0.29% | $2,234 |
Impact on Homeowners and Investors
Property tax rates and value assessments impact overall affordability and cost of living.
For instance, a large home in Birmingham, Alabama, (where the median effective tax rate is only 0.47%) may have a lower assessed value than a small home in New York City (where the tax rate is 2.39%), so your tax bill would likely be higher in New York.
When deciding where to buy, consider your household income and the cost of living in that location, which includes property taxes.
For commercial investors and rental property owners, buying in a location with a lower tax liability can maximize profits. The level of economic growth in an area can also impact affordability.
How Property Taxes Are Calculated
Paying the property tax bill looks different depending on your state and whether your state bases property tax liability on fair market value or assessed value.
Fair market value is the price a property would sell for on the open real estate market, taking into account factors such as supply, demand, and local economic growth.
The assessed value is the dollar amount assigned to a property based on comparable property sale prices, square footage, and market conditions, usually the total fair market value or a percentage of it.
If you don't know how to calculate property tax, you can multiply the property value by the effective tax rate. The resulting number is what you owe in taxes.
Role of Property Taxes in Public Services
Property tax revenue directly impacts community development, as it funds schools, emergency services, infrastructure, and local government operations. Homeowners aren't the only people who pay for these services. Commercial properties also utilize these services, and their property taxes help fund them.
Are Property Taxes Deductible?
In most cases, state and local property taxes on residential and commercial real property are deductible up to $10,000 per year.
Property Tax Saving Strategies for Homeowners and Investors
Check out our first-time homeowner's guide on property taxes for steps you can take to save. Some legal ways to save on property taxes include:
Dispute inaccurate property tax assessments via a property tax appeal or protest
Apply for property tax exemptions
Take advantage of early tax payment credits offered in some states.
Consult a tax professional on property tax deductions
Utilize Available Tax Exemptions
Some states offer property tax exemptions for qualifying residents to reduce their tax bills. Homestead exemptions for primary residential properties, exemptions for seniors and veterans, and reductions on land used for agricultural purposes apply to property values to lower the taxable amount. You can "stack" some of these exemptions for additional savings.
For example, a property valued at $100,000 with $25,000 in exemptions and an effective property tax rate of 1.02% has an annual tax liability of $765, a savings of $255 each year.
In certain states, qualifying homeowners are exempt from paying property taxes entirely. This applies most often to seniors over age 65, permanently disabled veterans, and residents with complete and permanent disabilities.
Understanding and applying for exemptions can result in significant savings. Ownwell helps homeowners apply for homestead exemptions for that year and retroactively for up to two years across all U.S. states.
Saving Money With Property Tax Exemptions and Appeals
Even though no state completely eliminates property taxes, substantial savings are within your reach through careful appeals and exemption filings. Our national homeowner survey found that only 22% of Americans have ever appealed their property taxes before, despite nearly three-quarters of them being concerned about significant increases, and two-thirds feeling that their property taxes have exceeded their budgeted allotment.
Ownwell specializes in helping homeowners and commercial property investors significantly reduce their property tax liabilities through precise appraisal appeals and maximizing exemptions.
Don’t wait — every dollar saved is another dollar toward your investment growth, home improvements, or future financial security!
