The median U.S. homeowner pays $2,971 in annual real estate property taxes, according to our research. Based on the median home value in the United States, this means the median effective property tax rate is 1.11%.
Some states are far more expensive places to be a homeowner. For example, New Jersey has the highest property tax rate in the United States, with an average effective tax rate of 2.46%. This means that a $400,000 home would result in a property tax bill of $9,840 annually.
On the other hand, there are some states where property taxes are below the U.S. average -- much lower in some cases. Here are the 10 states with the lowest property taxes in the nation, and a bit of context about why they're so low.
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The 10 states with the lowest property tax rates
We won't keep you in suspense. Here are (in descending order) the states with the lowest effective property tax rates as a percentage of a home's value.
10. Delaware (effective property tax rate: 0.62%)
9. Wyoming (0.61%)
8. Arizona (0.59%)
X. District of Columbia (0.59%) -- not a state, but still important to mention
7. West Virginia (0.59%)
6. South Carolina (0.58%)
5. Utah (0.57%)
4. Nevada (0.55%)
3. Colorado (0.52%)
2. Alabama (0.43%)
1. Hawaii (0.29%)
It's important to emphasize that these are state averages, and property taxes can vary dramatically within each state. Counties and cities might assess their own property taxes.
Plus, some states offer tax breaks to certain homeowners but not others. As an example, South Carolina's low property tax rates typically only apply to owner-occupants. Property taxes on a rental property can be roughly triple what owners would pay on their primary residence.
The point is that these figures should be used to get a sense of which states have generally low property taxes, but it's still important to investigate the property taxes that would apply to your situation.
Why do these states have low real estate taxes?
There are several potential reasons a state might have low (or high) property taxes. For starters, property taxes are only one way that states and local governments get tax revenue. Some states with low real estate taxes have relatively high property tax rates on vehicles.
For example, the state with the highest real estate taxes (New Jersey) doesn't have annual property taxes on vehicles at all – but Nevada, Wyoming, and South Carolina are all among the 10 most expensive states for vehicle taxes. Other states might have high sales taxes, or high state income taxes, or a combination of high taxes other than those on real estate.
Some states also have generous tax exemptions that apply to certain groups. We already mentioned South Carolina's favorable treatment of owner-occupied homes, and other states do this as well. Some states (like Hawaii) give large property tax breaks to older homeowners.
Also, several states get significant revenue from other sources and can give their residents a break on taxes as a result. Nevada is a great example; It not only has low real estate taxes, but also no state income tax.
It gets significant revenue from gambling-related taxes. Nevada categorizes this as part of its "amusement revenue," and it brings in more than 11 times the U.S. average.
The bottom line on low property-tax states
When it comes to real estate taxes, it is cheapest to be a homeowner in these 10 states. But this is only one part of the overall tax friendliness of any particular state, and the tax rates themselves only tell part of the story.
For example, Hawaii has the lowest effective property tax rate of 0.29%, but it also has a median home value of more than $826,000. And while Texas has one of the highest effective property tax rates in the U.S., it also has no state income tax, which can certainly help to offset the higher ongoing homeownership expense.
The bottom line is that while some of the states on this list are indeed tax-friendly places to live, any single form of tax (like property taxes) should be used as just one piece of the puzzle when evaluating the overall cost of living.
