What State Has the Lowest Property Taxes? How Taxes in Texas Compare to Other States
Property taxes in Texas may be on the high side compared to other states. Calculated and collected at the county level, property tax rates range from around 0.40 percent or less in some rural parts of the Lone Star State to two percent and higher in counties surrounding Texas' major metropolitan areas. The average property tax rate in the state runs about 1.80 percent, ranking among the highest in the country.
As we'll see, though, it's essential to understand all the factors influencing the cost of living in a particular region. While some states have comparatively low property tax rates, the high cost of homes in these areas results in equally high tax bills. On the other hand, some states feature lower-than-average home prices and higher property tax rates. Yet others have both above-average home prices and high tax rates.
Read on to discover which states have the lowest property taxes, the states where residents pay the most, and how the state of Texas compares and contrasts with the rest of the country.
Which States Do Not Have Property Tax?
The short answer for homebuyers wondering which states do not have a property tax is "none." However, technically speaking, Texas doesn't have an actual state property tax. Instead, real estate taxes are assessed and collected by the local government entities for whom the resulting revenue is earmarked, like school districts, counties, and municipalities.
While certain states' tax codes contain exceptions and homestead exemptions sufficient to reduce property taxes to zero in some cases, there's not a state in the country that doesn't assess property taxes in one form or another.
What State Has the Lowest Property Tax?
Compared to the rest of the United States, Hawaii has the lowest property tax rate at around 0.28 percent. However, there's more to that picture than meets the eye.
Though the property tax rate in the Aloha State may be lower than the rest of the country, home prices in Hawaii are almost three times higher than the U.S. average. Since property taxes are a percentage of a home's appraised value, expensive real estate in Hawaii translates into a higher-than-average tax bill for its residents.
Other States with Low Property Tax Rates and High Home Prices
Like Hawaii, several other states have low property tax rates but high home prices. For example, while the property tax rate in Colorado is relatively low at around 0.51 percent, above-average home prices mean homeowners face a tax burden among the highest in the country.
The situation is similar in Utah. Despite a low property tax rate of around 0.63 percent, home prices averaging nearly $600,000 result in tax bills typically higher than the rest of the country.
Though technically not a state, Washington, D.C. levies property taxes on real estate in the District. With home values in D.C. averaging more than $800,000, homeowners also pay property tax amounts above the national average, despite a low rate of around 0.56 percent.
States with Low Property Tax Rates and Low Home Prices
Several states in the country's southern region feature low property tax rates with home prices below the national average. For example, places like West Virginia and Arkansas have average home values well below $200,000 and property tax rates around 0.6 percent. Homeowners in these states typically remit some of the country's lowest total property tax payments.
Alabama has the second-lowest property tax rate after Hawaii, at 0.41 percent. With an average home price of just about $200,000, Alabama residents have one of the lowest property tax burdens in the United States. Homeowners in places like South Carolina, Louisiana, and Mississippi find themselves in a similar position, with homes listing below the U.S. median home price and tax rates among the lowest in the country.
Other Affordable States
Wyoming and Delaware also boast relatively low property tax rates compared to the rest of the United States, with home prices near the national average. Tax rates in both states are around 0.6 percent, with typical homes in the mid-$300s. Additional tax savings result from Wyoming's absence of an income tax and Delaware's lack of sales tax.
What State Has the Highest Property Tax?
Homeowners in New Jersey have the distinction of being assessed the country's highest property tax rates, at around two and a half percent. Though typical home prices in the Garden State sit at or below the national average, the high New Jersey real estate tax rate results in a typical total property tax bill of more than $8,000 on average-priced homes.
Where You'll Pay the Most: States with High Property Taxes and High Home Prices
As one might expect, homeowners in states with a combination of high tax rates and above-average home prices have some of the most considerable property tax burdens in the U.S.
New Hampshire and Connecticut, for example, have property tax rates over two percent and median home prices higher than the rest of the country. The average homeowner in these states typically has an annual tax bill exceeding $5,000. Similarly, New York and Vermont residents pay some of the country's highest real estate taxes, with rates around 1.7 to 1.9 percent.
States with High Property Taxes and Low Home Prices
A few states combine having some of the lowest median home prices in the country with property tax rates ranking among the nation's highest. For example, residents of states like Pennsylvania, Iowa, Nebraska, and Ohio have real estate assessment rates of around 1.6 to 1.7 percent. Despite home prices significantly less than the U.S. average, annual property tax bills in these states still rise near the top of the list.
What is the Property Tax Rate in Texas?
As mentioned earlier, Texas property taxes are among the highest in the U.S., with an effective tax rate of about 1.8 percent, well above many other states. Despite home values being slightly less than the national average, the high assessment rate results in the average Texan owing more than $3,000 in annual property taxes.
As we'll see in more detail in the next section, it's important to balance Texas' relatively high property taxes against the absence of a personal income tax and the comparatively low sales tax rates found throughout the state.
Where to Find the Lowest Property Taxes in Texas
Texas property taxes are levied at the local level through each county's appraisal district or assessor-collector office, rather than at a state level. Rates vary widely from one county to the next. Certain counties in rural West Texas are prime examples of the lowest property taxes in the state. Borden County, west of Abilene, boasts Texas' lowest rate at just 0.34 percent, while Glasscock and Ward counties have similarly low rates.
These West Texas counties, as well as nearby Midland County and Ector County, also feature home prices well below the national average, placing the Midland-Odessa region among Texas' most affordable metro areas.
Conversely, counties in the state's urban centers have some of the state's highest property tax rates. Fort Bend County, Harris County, and Brazoria County around the city of Houston have tax rates above two percent, as does Tarrant County in North Texas and Williamson County near the city of Austin.
Why are Property Taxes High in Texas?
Prospective homebuyers in the Lone Star State are often left wondering why property taxes in Texas are generally higher than in other states. As mentioned previously, it's essential to consider Texas' property taxes in the context of other factors related to the cost of living here.
For instance, Texas is one of only nine states that don’t impose a personal income tax. Combined state and local sales tax rates here are also near the lower end of the national average. So, in the absence of these other revenue sources, the state of Texas relies heavily on income from property taxes to pay for resources and services like public schools, infrastructure maintenance, and community safety. Property taxes pay for local community benefits.
So, despite relatively high property taxes compared with other states, Texas' lack of personal income tax and reduced sales tax rates help keep the cost of living in Texas closer to the low end of the national scale.
Lowest Property Taxes by State
Wondering where your state lands in the property tax rankings? Here are all 50 states (plus the District of Columbia) ranked in order from lowest to highest property tax rates.
|Rank||State||Average Property Tax Rate||Median Home Value||Annual Tax on Median Home Value||Annual Tax on U.S. Median Home Value*|
Sources: Bankrate.com, Roofstock.com, Zillow Home Values Index, FRED (Federal Reserve Bank of St. Louis)
*The U.S. Median Home Value as of Q2 2022 was $440,300.
Property Taxes: The Big Picture
As we've seen, property tax rates aren't the sole indicator of how much it costs to live in a particular part of the country. Because property taxes are assessed on appraised real estate values, a state's average home prices directly affect its residents' tax burdens. Other factors also influence the cost of living in different parts of the country, including state sales and income taxes. When reviewing Texas's comparatively high property taxes, it's important to remember the other factors that make living in the Lone Star State affordable.