States With The Best Property Tax Rates

As much as prospective buyers would appreciate living in states with no property tax, there’s simply no way of doing so. There isn’t a single state that doesn’t subject property owners to property taxes. The funds derived from levying property taxes on homeowners are integral to each and every state’s infrastructure. However, not all states coincide with huge property taxes. In fact, some states seem to go out of their way to make living within their borders as easy and economically friendly as possible. As a result, homeowners in a handful of states are awarded fewer costs than their more expensive counterparts.

If you are interested in learning which states have the best property tax rates, or simply want to understand what property taxes are, please reference the following.

Understanding Property Tax Rates

While one of the most misunderstood factors associated with homeownership, it’s absolutely imperative for prospective buyers to understand local property tax rates. In order to truly understand property taxes, however, buyers must first understand why they are paying them in the first place.

For better or for worse, property taxes serve as a primary source of state funding. Most states rely on the money they bring in from property taxes to fund their infrastructure. Local municipalities use the money they receive from property taxes to fund a number of projects: education, roads, parks and recreational activities, public transportation, and payroll for municipal employees. Most cities rely on the money brought in from property taxes to pay police, firefighters, and their local public works department. That is an important distinction to make: While most people may not be too fond of the idea of paying property taxes, the money is going to good use. A lot of the money is returned to the community from which it came, which begs the question: How do local municipalities decide how much to charge in property taxes?

The tax rate, otherwise known as the millage or mill rate, is entirely dependent on local authorities. Local tax authorities are responsible for determining the rate by which homes in their jurisdiction are taxed. Property tax rates take several factors into consideration, but it’s quite common for tax assessors to reverse engineer a rate they believe to be fair. That said, the powers that be will typically first identify how much they need to cover local services and then proceed to apply the property tax rate accordingly. More specifically, the rate is then applied to the home’s most recent appraised value.

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Why Property Tax Rates Aren’t The Only Factor

In the event prospective homeowners are trying to determine the true cost of living in a given neighborhood, property tax rates are far from the only costs that need to be taken into consideration. If for nothing else, property taxes aren’t the only variable; everything is relative. While some states have become synonymous with formidable property tax rates, they have found other ways to ease the burden. Texas, for example, is known for having abnormally high property taxes, but The Lone Star State has compensated for relatively high rates by getting rid of income tax. A great deal of the state’s funding is dependent upon its property taxes, which is why its able to get away with not having an income tax. Therefore, Texas’ high property tax rate isn’t as much of a burden as many people would assume. While the current tax rate appears high, the state has found out ways to make things easier on its residents.

Unfortunately, not all states operate the same. Not unlike how some states have gone through great lengths to save people money, others have gone the opposite direction. Both New Jersey and Illinois, for example, impose high taxes across the board. As a result, the cost of living is significantly heightened.

When all is said and done, property taxes are an important expense to consider, but they are just one piece of the puzzle. In reality, property taxes are merely relative to every other expense imposed by a state. It’s not until the rates are placed in the same context as the remaining taxes imposed by a respective state that the true impact of property taxes may be felt.

Why Median Home Values Matter

Everyone is aware of how property taxes vary dramatically from state to state, but fewer are aware that the differences translate to a county level. Within each state, property taxes will also vary from county to county. Local municipalities are responsible for imposing their own property tax rate on the houses within their jurisdiction. There is, however, one constant: the amount of property tax levied on a homeowner is directly correlated to a percentage of the home’s assessed value. You see, each county will determine their own property tax rate, which is then applied to the home’s assessed value. For example, a $130,500 home in a county with a tax rate of 0.40% will incur approximately $522 in property taxes each year ($130,500 x 0.40). The owner of a $200,000 property in the same county will be responsible for paying about $800 ($200,000 x 0.40). As you can see, the higher the median home value in a given county, the higher the property tax will be.

Are There States With No Property Tax?

To be perfectly clear, there are no states completely void of property taxes. Every single state across the country subjects homeowners to at least some degree of property taxation; there is no escaping them. It is worth noting, however, that the degree to which property owners are exposed to property taxes varies from state to state. Depending on the location of a respective property, it is entirely possible for the incurred taxes to prove either modest or monumental. Whereas some state property taxes may only serve as an inconvenience, others may rival that of the home’s mortgage payments. As a result, it’s important for prospective homeowners to understand exactly what they are getting into before following through with a purchase.

Each state across the United States offers a unique array of benefits in order to increase net migration. As a result, it’s entirely possible to live in a state where income or sales taxes are nonexistent. Property taxes, on the other hand, are unavoidable. No matter where someone chooses to call home, they’ll have to pay property taxes. That said, there’s no reason someone couldn’t choose to live in a state with the lowest property tax possible.

If you are looking for the states with the lowest property taxes, look no further. Here’s a list of the states where homeowners pay some of the least in property taxes (relative to the home’s assessed value):

1. Delaware

2. Arkansas

3. South Carolina

4. West Virginia

5. Hawaii

6. Louisiana

7. Alabama

1. Delaware

• Average State Property Tax Rate (Relative To Assessed Home Value): 0.529%

• Median Property Taxes Paid: $1,274

• Median Home Value (according To Zillow): $236,400

2. Arkansas

• Average State Property Tax Rate (Relative To Assessed Home Value): 0.619%

• Median Property Taxes Paid: $721

• Median Home Value (according To Zillow): $128,400

3. South Carolina

• Average State Property Tax Rate (Relative To Assessed Home Value): 0.574%

• Median Property Taxes Paid: $821

• Median Home Value (according To Zillow): $169,800

4. West Virginia

• Average State Property Tax Rate (Relative To Assessed Home Value): 0.589%

• Median Property Taxes Paid: $629

• Median Home Value (according To Zillow): $98,300

5. Hawaii

• Average State Property Tax Rate (Relative To Assessed Home Value): 0.278%

• Median Property Taxes Paid: $1,459

• Median Home Value (according To Zillow): $616,600

6. Louisiana

• Average State Property Tax Rate (Relative To Assessed Home Value): 0.479%

• Median Property Taxes Paid: $750

• Median Home Value (according To Zillow): $147,200

7. Alabama

• Average State Property Tax Rate (Relative To Assessed Home Value): 0.435%

• Median Property Taxes Paid: $550

• Median Home Value (according To Zillow): $133,800

Summary

While homeowners would certainly appreciate living in states with no property tax, there are simply no options. Every state levies property taxes to one degree or another. That said, it’s entirely possible to live in a state where property taxes aren’t as much of a burden. While some states do, in fact, subject homeowners to lofty property taxes, others are a lot easier to manage. Some states even go out of their way to lower property taxes to make living there more attractive. As a result, prospective homeowners may be able to lower their annual costs by living in the right places.

Key Takeaways

• There aren’t any states with no property tax, but some levy significantly fewer taxes.
• Property taxes are relative to subsequent taxes incurred in a given county.
• Property tax rates are applied to the most recent assessed value of a home.