Each state has a different tax rate, ranging from 2.49% to a mere 0.28%. Which states have the highest taxes and which have the lowest? You’ll be surprised.
With tax season upon us, it seems like a good time to check what homeowners pay in property taxes—and a new survey confirms that where you live makes a huge difference in how much you’ll have to cough up.
According to researchers at WalletHub, which analyzed tax data on all 50 states and the District of Columbia, the average American household pays $2,471 on real estate property taxes. But that can vary widely. And just in case you thought the country wasn’t polarized enough already, political leanings can often be an indicator of state tax rates: “Blue states” (defined by WalletHub as how they voted in the 2020 presidential election) generally pay higher property taxes than “red states.”
As for the state with the highest property tax rate, that’s New Jersey, where residents pay a rate of 2.49%, which means that people living in a median-priced home in the area ($335,600) will pay Uncle Sam $8,362 in property tax per year.
In fact, the five states with the highest tax rates are all east of the Mississippi.
Meanwhile, people in Hawaii are blessed with the lowest real estate tax rate of 0.28%. So even though a median-priced home in the area is expensive ($615,300), homeowners end up paying only $1,715 in taxes per year. In Alabama, the state with the second-lowest tax rate (0.41%) as well as bargain-basement median home prices ($142,700), you’ll pay even lower property taxes of just $587 per year.
Curious how your state stacks up? Below are the top 10 states with the highest—and lowest—property taxes:
States with the highest property taxes
- New Jersey: $8,362 (2.49%)
- Illinois: $4,419 (2.27%)
- New Hampshire: $5,701 ( 2.18%)
- Connecticut: $5,898 (2.14%)
- Vermont: $4,329 (1.90%)
- Wisconsin: $3,344 (1.85%)
- Texas: $3,099 (1.80%)
- Nebraska: $2,689 (1.73%)
- New York: $5,407 (1.72%)
- Rhode Island: $4,272 (1.63%)
States with the lowest property taxes
- Hawaii: $1,715 (0.28%)
- Alabama: $587 (0.41%)
- Colorado: $1,756 (0.51%)
- Louisiana: $890 (0.55%)
- District of Columbia: $3,378 (0.56%)
- South Carolina: $924 (0.57%)
- Delaware: $1,431 (0.57%)
- West Virginia: $698 (0.58%)
- Nevada: $1,614 (0.60%)
- Wyoming: $1,337 (0.61%)
Why are my property taxes so high—or low?
While property taxes may be high in some states, lower home prices may offset this tax burden. For example, Illinois—which has the second-highest tax rate, at 2.27%—has a low median home price of only $194,500, resulting in annual property taxes hovering around $4,419. That’s less than you’d pay in other states with lower tax rates (like New Hampshire and Connecticut).
So what can you do if you live in a state with high tax rates and high home prices?
“Unfortunately, living in the Northeast has become a very expensive proposition if you want to own properties,” says Ralph DiBugnara, president of Home Qualified and senior vice president at Cardinal Financial. “But homeowners should be aware of what they can write off when it comes to homeownership, especially in these high-tax areas.”
In other words, in high-tax-rate states with pricy properties, the good news is that you are allowed to write off (or deduct) up to $10,000 of your property taxes. Just remember that this may not cover all of your property taxes; it depends on how much your home is worth.
“If your home is worth $500,000 or below, you should be able to write off all of your property taxes,” says DiBugnara. “But if your home value is above $500,000 and in a state with tax rates around 2%, most of the time this is not enough of a write-off to cover all of your property taxes.”
This problem is typical in Northeast states. Still, any write-off is better than none, right?
To help with your overall tax bill, you can also write off mortgage interest as a tax deduction for a balance of up to $750,000. And if you buy or sell a home in a tax year, in most cases you will be able to write off transfer taxes—local or state taxes charged in any real estate transaction.
Green energy sources for homes that are powered by solar are also tax-deductible. You also have the right to appeal the amount of your property taxes if you think the assessed value of your home is too high.
Also weigh what your property taxes go toward when deciding where you want to live.
“People should definitely consider property taxes when they move, alongside information about the local services that those property taxes pay for,” says Stephanie Leiser, lecturer in public policy at the Ford School at the University of Michigan. “They should consider the ‘value for the dollar’ they would get from paying property taxes.”
For example, in some communities, services like trash pickup will be covered by property taxes, while in others, there will be a separate fee.
“It’s also important to keep the overall tax picture in mind when deciding where to move,” adds Leiser. “Low property taxes may sound great, but they may be offset by higher local sales taxes or other taxes and fees.”