10 States With the Lowest Property Taxes in America

These are the 10 states with the lowest property taxes in America. See what characteristics they share and what advantages they hold for current and prospective homeowners.

Jan 26, 2014 at 11:05AM

Whether you want to or not, it's time to circle those calendars and prepare for tax season, which has crept up on us once again. While the physical act of doing our taxes is rarely enjoyable, a majority of taxpayers do receive a refund, so tax time can be akin to a forced savings account for many Americans.

Some taxes, though, extend on a year-round basis. We pay sales tax in most states on goods purchased 365 days out of the year, and if you have a job you're probably paying a tax that will go to the massive social-welfare tool for the elderly and disabled that you know best as Social Security.

Another tax that has boundaries beyond April 15 is the property tax -- the so-called most hated tax in America, according to a Gallup poll.

Coins In Hand

Source: Tax Credits, Flickr.

Why do we hate property taxes so much?
Property taxes are easily the most hated tax primarily because there's no set formula for figuring out how they'll work from one county to the next. According to a study conducted by Benjamin Harris and Brian David Moore at the Urban-Brookings Tax Policy Center (link opens a PDF) in mid-November, the property tax paid as a percent of home value in a county can be as high as 4.2%, such as in Shannon County, S.D., or as low as 0.25% in Vermillion Parish, La.

Property taxes can also be the largest out-of-pocket tax for taxpayers, occasionally eclipsing their federal or state tax liability. Few Americans like paying their bills, so the displeasure associated with this tax, which costs a mean of $9,647 annually in Westchester County, N.Y., the most-expensive county to live in within the United States, is quite evident.

Finally, property taxes are based on the assessed value of your home, and property values have been all over the map in recent years, lending to the belief that you could potentially be overpaying on your home. Mistakes on a property value assessment aren't uncommon, but not all mistakes wind up being serious in nature or affect your property value all that much.

10 states with the lowest property tax in America
Yesterday we examined the 10 states with the highest property taxes in America and focused on some key ways you can use the property tax to your advantage to put more money in your pocket. Today, we're going to switch angles and look, instead, at the 10 states with the lowest property taxes in America and see what similarities and benefits that residents in these regions are enjoying.

Here are the 10 states with the lowest property taxes in America:

State

2012 Mean Property Taxes Paid

Alabama

$631

West Virginia

$718

Louisiana

$823

South Carolina

$858

Arkansas

$901

Mississippi

$1,004

Wyoming

$1,141

Indiana

$1,200

Delaware

$1,206

Idaho

$1,273

Source: Tax Policy Center.

As we noticed with the states that have the highest mean property taxes paid, the states with the lowest property taxes in America share some similar characteristics.

Whereas the highest-property-tax states have a high concentration of people in a generally small area, these 10 states generally have lower population density and a lot of open land. With land demand still relatively low and plenty of land left for development, the price of land, and therefore property, tends to be relatively inexpensive in these states relative to the rest of the country.

Low property taxes also tend to correlate well with national median household income levels. Based on data from the U.S. Census Bureau, and averaged over a three-year period, six of the bottom nine states for median household income are listed in our table (Mississippi, Arkansas, Louisiana, South Carolina, West Virginia, and Alabama). This doesn't make these places undesirable by any means, but it does correlate to why home values are lower in these states, and thus why property taxes are also lower in nominal dollar terms.

As we saw yesterday, though, mean property taxes paid tells us only half the story, because it doesn't tell us anything about property values within a state. That's why it's also prudent that we examine the property taxes paid as a percentage of home value in these states.

State

2012 Mean Property Taxes

Property Tax as a Percent of Home Value

Alabama

$631

0.46%

West Virginia

$718

0.62%

Louisiana

$823

0.52%

South Carolina

$858

0.57%

Arkansas

$901

0.68%

Mississippi

$1,004

0.80%

Wyoming

$1,141

0.63%

Indiana

$1,200

0.93%

Delaware

$1,206

0.53%

Idaho

$1,273

0.84%

Source: Tax Policy Center.

Although it's still very evident that residents in these 10 states pay well below the national average in terms of nominal and percentage-of-home-value property taxes, we can also see that residents in Delaware, despite paying nearly $500 more out of pocket annually, owe less as a percentage of home value (0.53%) than residents in West Virginia, who pay a mean of 0.62% of their home's value in property tax.

House Money Jar

Source: Tax Credits, Flickr.

These states offer homebuyers a big advantage
In addition to holding what might be construed as bragging rights throughout the rest of the nation, these 10 states also offer homebuyers cash-saving advantages.

The most obvious advantage of living in one of these states is that you'll be paying very little out-of-pocket for your property taxes. The majority of these states have a relatively low cost of living and reasonably priced home values, which translates into a lower-than-average out-of-pocket property tax. Furthermore, some states actually offer property tax exemptions, such as Louisiana, which allows homeowners to claim a Homestead Exemption on a maximum of $7,500 of assessed value, which helps keep its property taxes among the nation's lowest. The end result is more money you can use to invest in your future. You might even say that these states represent the ideal retirement environment, since they require so little be paid in annual property taxes.

The other advantage, which both the highest and lowest property tax states can take advantage of, is the ability to use property taxes as a deduction when you file your taxes. Clearly, this is a much bigger deduction for the 10 states we talked about yesterday, but we also have to think about this in terms of household income. Let's recall that the 10 states with the lowest property taxes also have lower median household income levels, making even a $1,000 property tax deduction a sizable benefit for taxpayers.

Take advantage of this little-known tax "loophole"
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