For some Americans, finding lower property tax rates is the key to affording a home. Depending on where you live, property taxes could be a major financial burden. In fact, states with low property taxes may entice some homeowners to make a cross-country move, if it means saving a few thousand dollars each year.
But what are property taxes, and why do we pay them? Essentially, a state’s effective property tax rate is the percentage of a property’s value. A home’s value is calculated during an assessment or appraisal. You can find your estimated property tax liability by multiplying your state’s property tax rate by the value of your home.
Sometimes, states with the lowest property tax rates have the highest average home prices. This means that although you may save money on taxes, you may struggle to find a home within your budget.
It is also important to note that property tax rates vary within each state. The amount of money you must pay toward property taxes often changes depending on the county, city or town within any given state.
When considering the states with low property tax rates, you must also consider property other than real estate. Currently, 27 states assess vehicle taxes each year as part of an owner’s property tax liability. This could add a few hundred dollars to a property owner’s taxes at the end of the year.
Looking to save some money on your property taxes? Here are 7 states with lowest property tax rates in 2021.
Hawaii has the lowest property tax rate in the country at .28%. If you purchase a home in Hawaii at the current U.S. median home price of $350,300, you would only pay $980.84 in annual property taxes. This is significantly less than the $8,722.47 you would pay for the same home in the state of New Jersey, which has the highest tax rate of 2.49%.
However, states with low property taxes typically feature some of the highest home prices in the country. Hawaii is no different; the median home price in this state is roughly $764,146. This means that although it has lower property tax rates than other states, Hawaii residents pay more for a home. If you purchase a home at the state’s median home price, you would owe $2,139.60 in annual property taxes.
If you’re looking for states with low property tax rates and low home prices, Alabama may be your best bet. The average state property tax rate sits at roughly .41%. Pair this with the relatively low median home price of $175,586 and you are looking at an annual property tax liability of just $719.90.
Although Alabama has some of the lowest property tax rates in the country, residents here tend to earn less money compared with other states. This can make it more difficult to purchase a home. The median household income within the state was roughly $50,536 as of 2019, per the U.S. Census Bureau. This is a bit less than the median income within the U.S., which stood at $68,703 in the same year.
Delaware is among states with lowest real estate taxes, lowest vehicle taxes and lowest sales tax rates. At roughly .57%, the property taxes in the First State are some of the lowest in the northeast. When it comes to affordability, Delaware could be a top contender. The state does not impose any state or local sales tax and does not assess vehicle taxes.
The median home price in Delaware is $317,985. If you purchase a home at this price, you would need to pay $1,812.51 in annual property taxes.
Louisiana is one of the best states with low property tax rates because it also features relatively low median home sale prices. Home prices vary wildly throughout the state depending on where you live, but the median sales price is currently $193,114. With an average state property tax rate of just .55%, you would pay $1,062.13 in annual property taxes.
While it does have lower property tax rates, it’s important to note that anyone who owns a vehicle must pay vehicle taxes. The state’s average vehicle tax rate is currently .10%. This rate may only be a minor inconvenience for owners; if you have a car worth $25,000, you would only owe $25 in vehicle taxes.
Colorado has some of the lowest property tax rates in the country, though rates vary significantly depending on the county. The statewide average property tax rate is roughly .55%. In Cheyenne County, however, residents pay roughly .49%. Boulder County residents pay more in property taxes at a rate of about .57%.
Keep in mind that the average home value in Colorado has been rising steadily for years. This leads to an increase in property taxes as well. The median home price in the state is $509,800, which is up a whopping 20% in just one year.
As one of the states with the lowest real estate taxes at just .57%, South Carolina also offers savings on vehicle tax rates. Residents do not pay any vehicle taxes, regardless of the cost of the car. Paired with modest median home prices, the state ranks toward the top for affordability.
If your home is worth the state’s median home price of $236,344, you would owe just $1,347.16 in annual property taxes. However, the state does assess a vehicle tax rate of roughly 2.38%. This translates to a vehicle tax liability of $593 each year on a $25,000 car.
District of Columbia
Washington, D.C. has lower property tax rates than many states. While it is not an official state, it does assess its own property tax rate at .56%. It does not, however, have vehicle taxes, savings residents of this district hundreds of dollars each year.
Keep in mind that median home prices in D.C. are extremely high compared to neighboring states. Currently, the median home value sits at roughly $698,019, which means the annual tax liability on a home of this price would be about $3,908.91.