The Best and Worst Property Taxes by State

Median state tax rates can vary considerably

Father carrying his little son as he mows the lawn in front of a chalet-type home
•••

Westend61 / Getty Images

Every state and the District of Columbia impose some form of this type of tax. These taxes are commonly associated with real estate, but some states tax vehicles and other assets as well. Rates can range from very low in one area to astronomically high in another, but other types of taxes can balance property tax rates. So, the overall impact on residents is about the same.

Property taxes generate the revenue states need to keep themselves up and to run necessary services. School districts tend to rely heavily on these taxes, but they also fund city and state workers' salaries—including first responders—as well as water, sewer, and other services.

Property taxes aren't set only at the state level. Cities, counties, and local school boards can also impose taxes so that they might be higher in one area of a state than in others.

How Property Taxes Are Calculated

A lot of complicated math is used to calculate property taxes, and states compute rates according to their unique formulas. All share two important components, however: a property's assessed value and the tax rate. The percentage tax rate is applied to the value to arrive at your tax bill.

Percentages are a good way to compare state property tax burdens because they provide a standardized number.

Someone in State A might pay $10,000 a year on a home worth $1 million, while someone in State B pays $10,000 a year on a condo worth $150,000. The person in State B has a more onerous tax burden. The person in State A is paying only 1% of their home's value while the one State B is paying almost 7%, although they're both paying the same tax dollar amount. 

The 10 Best States for Property Taxes

Tax-Rates.org reported on the top 10 best states for these taxes in 2019, showing them in order from lowest to highest rates.

These are median percentages using aggregate data—half of all rates are higher, and half are lower in each state.

The 10 Worst States for Property Taxes

World Population Review found that homeowners in the following states paid the most in property taxes in 2019. They're ranked from the most to least expensive in this category.

Comparing Rates

The difference between Louisiana—the state with the lowest rate—and New Jersey's with the highest rate is a whopping 1.71 percentage points. This figure might not sound like much at first glance, but again, it can come out to a pretty significant tax bill when it's correlated to a home's value, particularly on a luxury home. 

For example, the median tax on a $1.5 million Louisiana home works out to $2,700 at 0.18%. It works out to $28,350 in New Jersey at a median rate of 1.89% on the same home value. That's a very significant difference of $25,650.

The Correlation With Other Tax Rates

Some states that impose formidable property tax rates—such as New Hampshire and Texas—give residents a few breaks in other major tax categories. For example, Texas taxes property at a significant median rate of 1.81%, but it has no state income tax. The state relies heavily on property taxes to make ends meet.

Some states such as New Jersey and Illinois impose high taxes across the board, however. New York has the highest combined property, income, and sales taxes, followed by Hawaii—and yet Hawaii made the list of the 10 best for property taxes, notching in at No. 2 at just 0.26%.

Who Sets Home Values?

You can't simply tell the state, county, or municipality how much you think your home is worth and let them take it from there. Your home's value for tax purposes is based on its appraised value, and the appraiser is not an independent third party. Tax assessors typically work for the government.

Most states have an appeal process in place, so you have some recourse if you receive an astronomical and unreasonable assessment.

You can expect your tax bill to go up if you add a second floor to your home or put an in-ground swimming pool in your backyard because improvements such as these will most likely increase your home's value. You could find yourself paying more in property taxes even if your state's tax rate remains unchanged because that percentage rate is applied to a larger value.

How the Appraiser Arrives at Value

The values of recently sold homes in your area can be taken into account when calculating value. The appraiser will compare your home to others similar to yours and value it based on those sales prices, using a method known as the market approach.

The cost approach is based on how much it would cost to replace your home, although this method is used less frequently with residential properties.

Property Tax Relief

Several states offer various options to reduce the burden of these taxes.

  • Some provide property tax exemptions to senior citizens, veterans, and the disabled.
  • Several states offer homestead exemptions for at least a portion of a home's value if the owner resides there—it's not a rental or investment property. 
  • Homeowners might also qualify for a state tax credit in some areas based on the amount of their property taxes. You can also claim a tax credit for property taxes on your federal return if you itemize your deductions.

You can often ask for relief if you're going through a tough financial time. Some taxing authorities will defer your payments for a period.

The worst thing you can do is ignore your tax bill if it's not included in your monthly mortgage payment, which is often the case. Simply not paying can invite disaster in the way of tax liens and foreclosure.

Article Sources

  1. Tax-Rates.org. "Property Taxes By State." Accessed Sept 2, 2020.

  2. World Population Review. "Property Taxes by State 2020." Accessed Sept. 2, 2020.

  3. World Population Review. "States With No Income Tax 2020." Accessed Sept. 2, 2020.

  4. World Population Review. "Tax Burden by State 2020." Accessed Sept. 2, 2020.

  5. New York State Department of Taxation and Finance. "How Property Is Assessed." Accessed Sept. 2, 2020.