10 States With The Lowest Property Taxes In 2022

When it comes to buying or selling property in a new state, considering the fluctuation of property taxes is essential. Understanding the states with the lowest property taxes can help optimize taxpayer obligations and allow investors to expand their assets. In this article, we'll explore which states feature the most attractive property tax rates and how these taxes are calculated.

What Is Property Tax?

Property taxes are paid by property owners, whether they are individuals or legal entities. The local government assesses the amount of tax to be paid based on the property's location. While property taxes typically refer to real estate assets, some states also assess taxes on other property types. These taxes fund municipal projects such as public transportation, academic development, and road improvements.

Owning property in states with low property taxes is crucial, especially with tax season approaching. Although every state imposes property tax, the rates vary greatly. It's important to be aware of the tax rate in the state or states where you own real estate.

What Are Property Taxes Used For?

Property tax dollars are primarily used to fund public services that benefit the community. These services include improving local schools, maintaining city parks, supporting museums and libraries, road construction and repair, emergency services, and local government administration.

The states with the lowest property taxes

What States Don’t Have Property Taxes?

While every state has a minimum property tax, some states have a lower reliance on these taxes for funding local projects. Real estate investors often prefer states with low property taxes, as they tend to have higher population growth and offer better investment opportunities. However, it's important to note that property taxes are not the only factor to consider when investing in real estate.

How Are Property Taxes Calculated?

Property tax is calculated based on the value of the property. Each state has unique formulas to calculate property tax rates, but they all consider the property's assessed value and the percentage tax rate. Comparing the tax rate itself is the easiest way to compare property taxes between states.

For example, if person A in state A owns a home worth $1 million and was assessed a property tax of $10,000 last year, the property tax rate is 1 percent. If person B in state B owns a condo worth $150,000 and was also assessed a property tax of $10,000 last year, the property tax rate is a whopping 7 percent. Although they paid the same dollar amount, person B has a much heavier tax burden.

10 States With The Lowest Property Taxes

If you own property or plan to invest in real estate, knowing the states with the lowest property tax rates can save you money. Here are the top 10 states with the lowest property taxes:

1. Hawaii (0.31%): Despite having the lowest effective property tax rate, Hawaii also has the highest median home value in the country, which can still result in substantial tax bills.
2. Alabama (0.37%): Alabama offers one of the lowest property tax rates in the country and affordable property values.
3. Louisiana (0.51%): Louisiana has a low effective property tax rate and considerably lower property values, along with a low cost of living.
4. Wyoming (0.51%): Although Wyoming's property values are slightly higher, the absence of state income tax and a low sales tax make it an affordable state to live in.
5. Colorado (0.52%): Colorado has low property taxes, but high home prices can increase potential tax burdens.
6. West Virginia (0.53%): With low property taxes and modest home prices, West Virginia is an attractive state for real estate investors.
7. South Carolina (0.53%): South Carolina has identical property tax rates to Colorado but lower home values, making it an appealing option.
8. Utah (0.56%): Although Utah has higher property tax rates, the state's high median household income balances out the obligation.
9. Delaware (0.59%): Delaware residents may have slightly higher property taxes due to above-average home values, but no sales tax and high median household income make it attractive.
10. Arkansas (0.61%): Arkansas offers low property tax rates and affordable housing costs, making it an attractive state to live in.

Take Note

While these states have attractive property tax rates, purchasing a high-valued property will likely result in a larger tax bill regardless of the state. However, by considering property tax rates along with median income and cost of living, real estate investors can identify the most prosperous options.

10 States With The Highest Property Taxes

Now, let's reveal the 10 states with the highest property tax rates in the country. If you own property in one of these states, you can validate your feelings about high property taxes. If your state is not on this list, be aware that there are property owners paying even higher taxes.

1. New Jersey: 2.49%
2. Illinois: 2.27%
3. New Hampshire: 2.18%
4. Connecticut: 2.14%
5. Vermont: 1.90%
6. Wisconsin: 1.85%
7. Texas: 1.80%
8. Nebraska: 1.73%
9. New York: 1.72%
10. Pennsylvania: 1.58%

Take Note

The states with the highest property taxes might still be attractive to real estate investors for other reasons, such as a lack of income tax or low home values. Additionally, homeowners might qualify for property tax exemptions offered by local jurisdictions, such as exemptions for seniors, disabled individuals, or veterans.

Cities With The Highest Property Taxes

Cities also have jurisdiction over property taxes, resulting in even more variation in tax rates. Some cities known for high property tax rates include Elizabeth and Paterson in New Jersey, and Waterbury, Rockford, and Peoria in Illinois.

Average Property Tax Rate By Region

Average property tax rates vary by region in the United States. Here are the average rates by region, according to research by Quicken Loans:

• Northeast: 1.41%
• Midwest: 1.29%
• Southwest: 0.91%
• West & Southeast: 0.66%

How To Lower Your Property Taxes

If you want to lower your property taxes, there are several options available:

1. Check Eligibility For Property Tax Exemption: Some states offer exemptions for seniors, veterans, active-duty service members, and individuals with disabilities. Check if you qualify for any exemptions.
2. File For A Homestead Exemption: The homestead exemption can lower property taxes on primary residences. The exemption protects homeowners up to a certain amount or percentage of their annual property taxes.
3. Raise Concerns With The Tax Assessor: If you believe your property value assessment is unfair or unreasonable, you can challenge it with the tax assessor. They will conduct a new assessment if necessary, potentially resulting in a lower tax bill.

Summary

Understanding property taxes and the states with the lowest property taxes is crucial for real estate investors and homeowners. By considering property tax rates alongside other factors like income and cost of living, you can make informed decisions when purchasing real estate. Remember, property taxes vary significantly from state to state, so choose wisely when investing in property.

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