The 10 States With The Lowest Property Taxes In 2021

Key Takeaways


Do you own property in one or more of the states with the lowest property taxes? If you own real estate, you should know this, especially with tax season coming up. According to Forbes, the total amount of property tax collected in 2019 was $306.4 billion. With 86 million single-family homes in the U.S., that was an average of $3,561 per household or an average tax rate of 1.14%. However, this average does not paint the whole picture. Although every state imposes property tax, the tax rate varies greatly from state to state. Property taxes can be very low in one state, but very high in the next. That’s why you should be aware of the tax rate in the state, or states, where you own any real estate.

What Is Property Tax?

Property taxes are taxes paid by property owners. The owners can be individuals or legal entities, such as corporations or other types of businesses. The amount of tax to be paid is assessed by the local government where the property is located. We’ll talk about how the tax is calculated in the next section.

Although property tax usually alludes to real estate, some states also assess property tax on other types of personal property, such as cars and boats. Property taxes are a key source of income for local governments. They are used to fund municipal projects such as schools, road improvements, parks and recreation, and public transportation.


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States with lowest taxes

How Is Property Tax Calculated?

Property tax is calculated using the value of the property in question. More specifically, the value is assessed based on the type of property, its structure, and the land that it sits on. For example, a vacant plot of land will have a much lower tax than its neighbor with a similar plot of land that has a house and guest cottage on it. If the property has access to public services or has the potential for further development, higher taxes could be assessed.

Each state computes its property tax rate using its own unique formulas. However, they all share two common factors: the property’s assessed value and the percentage tax rate. Because of this, it’s easiest to look at the tax rate itself when comparing and contrasting property taxes between states.

For example, let’s say person A in state A owns a home worth $1 million. They were assessed a property tax of $10,000 last year. That’s a property tax rate of 1 percent. Then, let’s say person B in state B owns a condo worth $150,000. However, they were assessed a property tax of $10,000 last year as well, the same amount person A paid. That’s a whopping 7 percent property tax rate. Although person A and person B paid the same dollar amount, you can easily tell that person B has a much heavier tax burden by looking at the property tax rate.

Who Sets Home Value?

Now, you’re probably wondering who exactly determines why person A and person B in the example above paid what they did in property taxes last year.

The entities that set home values in each state are tax assessors. They are typically government agents who value your property every one to five years. They will look at other similar properties in your market and compare recent sales prices to determine your property’s value. Unique formulas are also involved, and as you might imagine, this involves a lot of complicated math.

You can expect your tax bill to go up if you add any value to your home, such as by adding a pool or building a second story. Most states offer an appeal process so that there is some recourse if you feel like your property value assessment is unfair or unreasonable.

What States Do Not Have Property Taxes?

This question may have given you hope that there might be states with no property tax at all, but unfortunately, there is no such thing. Property taxes are essential; they are used to fund government services critical for the public good and welfare. Therefore, every state assesses property taxes in one shape or form. However, the good news is that some states have a much lower property tax rate than others.

10 States With Lowest Property Tax

Here’s the moment you’ve been waiting for: the big reveal of the 10 states with the lowest property tax rates! If you own property, then you’ll know the pain of having had to pay property taxes every year. However, if you own property in one of the states listed below, this annual expense is less of a burden. If you’re thinking about buying real estate, you might consider investing in real estate in one of the following states, even if you don’t plan to live there.

  1. Hawaii: 0.30%

  2. Alabama: 0.40%

  3. Louisiana: 0.52%

  4. Wyoming: 0.55%

  5. West Virginia: 0.55%

  6. South Carolina: 0.56%

  7. Colorado: 0.56%

  8. Delaware: 0.58%

  9. Utah: 0.62%

  10. Arkansas: 0.64%

States with no property tax

10 States With Highest Property Tax

Next, we’ll reveal the 10 states with the highest property tax rates in our country. Do you own property in one of the following states? If you have felt like your property taxes were high, this will validate your feelings. If your state didn’t make it into this top 10 list, now you know that there are property owners out there paying much higher taxes than you are.

  1. Illinois: 2.22%

  2. New Jersey: 2.19%

  3. Texas: 2.11%

  4. Vermont: 2.11%

  5. Connecticut: 2.04%

  6. New Hampshire: 1.93%

  7. New York: 1.87%

  8. Pennsylvania: 1.75%

  9. Ohio: 1.68%

  10. Nebraska: 1.57%

Summary

Above, we revealed the 10 states with the lowest property taxes and the 10 states with the highest property taxes. Hawaii currently has the lowest property tax rate at 0.30%, while Illinois has the highest rate at 2.22%. With a difference of 1.92%, this shows us that property taxes vary significantly from state to state. As a property owner and real estate investor, the local property tax rate can and should influence your decision on where to invest. If you’re interested in buying real estate in a different state from the one you live in, here’s our guide on how to invest in real estate from a distance. If you’ve been wondering how to find out how much you’ll need to pay in property taxes, visit your county’s assessor website. Some even offer handy calculators so that, come tax season, the bill won’t come as an utter surprise.


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