The States Having the Lowest Property Taxes

Warning: Undefined variable $custom_content in /home4/comcompare/public_html/mortgagenews/wp-content/plugins/code-snippets/php/snippet-ops.php(582) : eval()'d code on line 10
Amanda Byford
Follow Me

If you Are looking to be the owner of a property in the US, you’ll have to pay property taxes. 

Property taxes are a necessary part of real estate. Fortunately, property taxes vary by state, so you have little control over how much property tax you have to give.

Property taxes even vary by county, but we’ll estimate property taxes by the state to help you decide where to purchase a home. 

Nationwide, Americans pay a  standard of $2,471 in property taxes each year. However, this number can vary drastically between states as residents of Alabama pay $587 annually and residents of New Jersey pay $8,362 annually. 

The state you choose could have a major impact on the amount of property tax you pay each year.

How Property Taxes Are Calculated?

To understand why property taxes differ by state so much, it’s important to first know the property tax calculation. 

For each homeowner, the annual property tax amount is calculated by multiplying some millage rate by the property value. 

The millage rate is, also called the property tax rate, is a percentage tax rate found using the state’s average mill levy. 

Each county has diverse mill levies, which is a flat dollar tax amount paid for each $1,000 in property value. 

Property taxes apply proportionately, which means to calculate your entire tax amount for the year, you can apply the millage rate indiscriminately. 

For example, if the millage rate is 1.8% in your state and you have a $500,000 home, your overall property tax would be $9,000. 

This is vital because it means that when considering property taxes, you have to equally pay attention to the property tax rate and the property value. 

The reason New Jersey has the highest property tax in the US by far is that it has one of the highest millage rates and one of the highest median home values. 

These two factors give an average property tax over 30% higher than the next highest state, Connecticut.

Lowest Property Taxes

Generally, states with high real estate prices will charge high property tax rates. The reason for this is because property taxes are used to fund public services such as schools and hospitals. 

To keep these services operational the counties with more public services need more tax revenue. 

Unfortunately, you may have less access to these public services if you are planning on paying lower property taxes

There are also two ways to classify lower taxes. While we look at total property taxes paid, you should also be interested in the millage rate or property tax rate. 

This way, you will be able to compare your total property tax without factoring in the home price. 

That being said, the lowest property tax rates belong to these three states which are, Hawaii at 0.28%, Alabama at 0.41%, and Colorado at 0.51%. 

These property taxes are extremely low mainly compared to states with high property taxes. 

For example, New Jersey’s property tax rate of 2.49% is about 5x as big as Colorado and about 9x as big as Hawaii.

Hawaii has the lowest property tax rate because of the reason that many homeowners in Hawaii County take advantage of a lower tax rate if they qualify for the homeowner exemption. 

This is because Hawaii wants to support local homeowners instead of letting their real estate market get inflated by tourists. 

Hawaii also charges high-income taxes because many of its homeowners are retirees with a fixed income. 

Through these tools, the Hawaii government can keep housing within your means for a large portion of their population.

Reference Source: Fang Wallet

Leave a Reply