Another Top-10 List — Lowest (and Highest) Property Tax Rate States

Property taxes can be a significant economic expense for homeowners and businesses alike, but they range from very low (0.28 percent per year of market value in Hawaii) to what I call obscene (2.13 percent in New Jersey), based on a study completed by the National Association of Home Builders.  Given the 2017 Tax Cuts and Jobs Act, individuals that itemize will be able to deduct from their federal income tax return a maximum of $10,000 of combined state individual income, sales and property taxes.    Some states use all three of these tax sources for revenue, while other states do not use an income or sales tax. In some states, such as Alaska, while there are property taxes, all revenues flow to local taxing authorities and none to the state coffers.

When it comes to property taxes, key is the actual tax burden and any tax deductive relief by the property owner.  To analyze what the typical property tax burden is by state and how it varies across the country, the NAHB utilized underlying data are from the U.S. Census Bureau’s American Community Survey.   The NAHB analysis further expanded those findings to include metrics estimating the average effective taxes per $1,000 of home value and the average effective property taxes per owner-occupied home in 2015.

So what states had the lowest and highest effective property tax rates in 2015?  The first table shows the 10 with the lowest effective rates while the second lists the highest.  Realize that some states have comparably higher sales and/or personal income tax rates as well differing revenue needs based on state obligations when compared to others, so a comparably low or high property tax rate does not necessarily correspond to each state’s overall tax burden on consumers and business.

Total effective property taxes are a function of the tax rate times the value.  Property taxes are ad valorem based , that is, a function of the overall value of the asset.  The first table shows the states with the lowest average total property taxes and the second the highest.  While Texas had the 44th highest effective property tax rate, with a lower typical home value, the Lone Star state falls out of the top-10 based on total property taxes paid.

Want to know how your state stacked up?  Look at the following table showing ranks for all 50 states and the District of Columbia.

To read the entire NAHB study click

While these rates and taxes paid are averages, they can vary dramatically within each of the states.   Various abatements (exclusions, and exemptions), reductions in property tax liability such as age, military service, and homesteads, can alter the actual property taxes paid when comparing homes with essentially the same values.

As the infamous Benjamin Franklin wrote in a letter in 1789 to John-Baptiste Leroy, “….but in this world nothing can be said to be certain, except death and taxes.”  Though the Death and Taxes statement was also given earlier in 1726 by Daniel Defoe and in 1716 by Christopher Bullock, Franklin no doubt is most often quoted on this topic.

If you have questions, reply back.


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