Are There Any States With No Property Taxes? The Top 10 Cheapest

Per U.S. Census Bureau data, the average American homeowner spends $2,471 on property taxes every year. However, the median amount paid in real estate taxes varies drastically depending on the state. For example, on average Alabama residents paid only $587 annually while New Jersey residents shelled out $8,362.

There’s a common misconception that there are states with no property taxes. While this isn’t exactly true, there are states where homeowners pay very little.

To give you insight on how some states have next-to-no property taxes, we spoke with an experienced certified public accountant (CPA) and created this detailed list of states with the lowest property taxes.

States don’t levy real estate property taxes, local governments do

While property taxes may be outlined under State Law, county and municipal governments are the ones that levy them.

Zach Reece, CPA and the owner and COO of roof repair company Colony Roofers in Atlanta, GA, explains that “property taxes are levied from all property owners within a given area based on the value of their property and the needs of the local government that receives the tax revenue.”

This means that real estate property taxes aren’t included in the payments you make on your state or federal tax returns. In most cases, homeowners pay their local property taxes as part of their monthly mortgage payments or directly to their local tax office.

Effective tax rates offer a state-level average

Because property taxes are charged by local governments, the rate homeowners pay differs depending on where they live within a state.

However, we can calculate the average property tax for a given state by looking at effective tax rates on owner-occupied housing. Effective tax rates are the average amount that homeowners across a state pay in property taxes, expressed as a percentage of the value of a home. To find out your individual tax rate, divide your annual property tax bill by the estimated value of your property.

States with the lowest property taxes

Let’s take a look at the ten states with the lowest effective property tax rates. Each rate is calculated by using current U.S. Census data and dividing the median home value by the median property tax paid.

1. Hawaii

Median property tax rate: 0.28%

While the cost of living in Hawaii is high, property taxes are very low. The cheapest of its five counties, Honolulu, has an average rate of 0.38% while the most expensive, Hawaii County, has an average rate of just 0.9%.

These low tax rates still leave Hawaii counties with plenty of money, as the state’s median home price is $691,360 — 82% higher than the national average. Additionally, out-of-state property owners pay more, with an average rate of 0.83%.

2. Alabama

Median property tax rate: 0.40%

Living in Alabama is relatively inexpensive and the median home price is also below the national average. This makes Alabama a great place to live for people looking to save money or retire on a fixed income.

3. Colorado

Median property tax rate: 0.49%

Colorado has a cost of living that’s just over the national average, and home prices that exceed the national average by about 27%.

One reason that Colorado’s property taxes are so low is because the state passed the Gallagher Amendment in 1982, limiting the amount of a home’s value that is subject to property tax to 45%.

4. Louisiana

Median property tax rate: 0.53%

Louisiana’s cost of living is around 7% lower and home prices are around 52% lower than the national average. A big factor influencing the state’s low property tax rate is its generous homestead exemption, which gives homeowners a break on the first $75,000 of their home’s value.

5. Nevada

Median property tax rate: 0.53%

Home prices in Nevada are just under the national average while the cost of living is slightly above average. The state’s low property taxes are partly due to an abatement, capping owner-occupied residential property taxes at 3%.

6. District of Columbia

Median property tax rate: 0.56%

Like Louisiana, Washington, D.C. also has a homestead exemption. D.C.’s exemption functions similarly, but exempts $75,700 instead of $75,000. Additionally, homeowners who are over the age of 65 who earn under $134,500 can apply to have their property taxes reduced by half.

7. South Carolina

Median property tax rate: 0.55%

South Carolina gives its residents lower property tax rates by making a distinction between owner-occupied residences and other properties. For properties occupied by the owner, the assessment rate is 4%, while rental, second, and investment properties are assessed at 6%.

8. Delaware

Median property tax rate: 0.56%

While home values and cost of living are just about average, Delaware is often seen as a tax haven for retirees, especially from the neighboring state of New Jersey. This is largely because Delaware maintains their low property tax rate by enacting relatively high income taxes, making out at 6.6%

9. West Virginia

Median property tax rate: 0.57%

West Virginia has an average home value of $119,600, less than half of the national average. Furthermore, the cost of living is about 10% less than most states. Combined with low property taxes and exemptions for seniors and disabled individuals, West Virginia is definitely an affordable place to own a home.

10. Wyoming

Median property tax rate: 0.57%

Rounding out the bottom of our list is Wyoming. Wyoming has fairly average home prices and a slightly lower cost of living (based on meric.mo.gov data series) than most states, but property taxes are very low. Rates are generally this low because the state only applies property taxes to 9.5% of the total value of residential properties.

Homeowner tax breaks help lower the bill

Even if you don’t live in one of these states, you still might be able to save on your annual tax bill by making use of exemptions, deductions, and other homeowner tax breaks. Here’s some common ways for homeowners to save come tax time:

• Home mortgage interest deduction: Reece tells us that this is the most common way for homeowners to catch a break on their federal taxes. The IRS allows you to deduct home mortgage interest on the first $750,000 (if married and filing jointly) of mortgage debt you hold.
• Senior benefits: People over the age of 65 are often offered property tax benefits from their state. For instance, Oregon allows low-income senior homeowners to borrow money from the state to pay local property taxes.
• Installing alternative energy features: The federal government offers a tax break of up to 30% of the cost of installment for homeowners who install alternative energy sources like fuel cells, geothermal heat pumps, and wind turbines on their property. While this won’t directly affect your property taxes, the reduced energy costs can save you some money.
• Veteran benefits: There are many property tax benefits available to veterans, although some states will only provide them if you’ve been disabled. Here’s a state-by-state list of the property tax exemptions available to past service members.

These are just the most common tax breaks, so check with a local CPA to see if there are other benefits available in your state.

If you’ve applied all the available tax breaks and still think the bill is too high, Reece tells us that “you can dispute your property tax assessment at your local county auditor’s or treasurer’s office.” However, Reece also points out that you typically need to file these disputes within 30 to 60 days of receiving your assessment, so don’t delay.

When property taxes are lower, other taxes are higher (usually)

Nationwide, local governments rely on property taxes for over 70% of their revenue, and use these funds to pay for public schools, government services, construction projects, and more. If a county or city has low property taxes, they’re likely to raise taxes in other areas in order to compensate.

For example, Louisiana’s median property tax rate is only 0.53%, but local sales tax rates are just below 10%. Similarly, in Nevada, the average local sales tax is 6.85%. These sales tax rates are quite significantly higher than the national average local sales tax of 1.45%.

Key takeaways

Property taxes (and taxes in general) are complicated, and many people feel lost when trying to figure out how to save money. For tailored advice, consult a local CPA. And in the meantime, remember these key property tax takeaways:

• Your local government is the entity that levies your property taxes.
• States can set general guidelines for how counties assess and charge for property tax.
• There are both federal and state-level benefits that can help you save big money on your property taxes.
• Don’t move to a state just because property taxes are low — other taxes are likely higher to compensate.

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