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10 States With the Lowest Property Taxes

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If you are in the market for a new home, then you might want to consider the amount of property taxes you will need to pay. When calculating how much you can afford to buy, you’ll need to factor in property taxes along with the mortgage, utilities, insurance, and other costs of homeownership. Where you settle down impacts the amount of property taxes you will owe.

What Are Property Taxes?

Property taxes are annual taxes levied by local governments on your land and buildings. Municipalities calculate taxes by multiplying the applicable local tax rate by the assessed value of your property. The appraised property value typically is less than the market value and depends on the neighborhood, structures on the property, and other factors.

For most cities and counties, property taxes are the primary source of revenue for local government, funding schools, city employee salaries, emergency services, infrastructure projects, and more. States typically provide parameters for setting tax rates, but localities can set their own rates within those parameters. Each locality differs in size and in the services provided, each jurisdiction has different needs and different property types, so tax rates vary greatly across the country, within states, and even within counties or cities.

States With the Lowest Property Taxes

Below is a list of the 10 states (plus the District of Columbia) with the lowest effective tax rates. The effective tax rate used here is an average calculation of the total actual property taxes paid for calendar year 2018 as a percentage of the estimated total value of all owner-occupied homes in the state. Property taxes due depending in large part on the value of the real estate, so even when a state has a low tax rate, like Hawaii, homeowners still might have a high tax bill if their home value is also high. Additionally, some areas of the state might have significantly higher or lower property taxes.

Property tax rates fluctuate from year to year, so the top 10 shifts annually. However, for the past several years, the states of Hawaii, Alabama, and Louisiana have remained the states with the three lowest effective property tax rates.

(Note that the median home values are from the Zillow Home Value Index for December 2019.)

  1. Hawaii (0.30 percent effective property tax rate; $638,007 median home value)
  2. Alabama (0.40 percent; $140,030)
  3. Louisiana (0.52 percent; $167,376)
  4. Wyoming (0.55 percent; $252,310)
  5. West Virginia (0.55 percent; $107,789)
  6. South Carolina (0.56 percent; $187,337)
  7. Colorado (0.56 percent; $398,753)
  8. Delaware(0.58 percent; $254,717)
  9. District of Columbia (0.59 percent; $628,914)
  10. Utah (0.62 percent; $350,841)
  11. Arkansas (0.64 percent; $128,777)

Property Tax Exemptions

Some locations allow for certain property tax exemptions based on either the homeowner’s status or certain characteristics of the property. For example, partial exemptions exist in some locations for properties with certain renewable energy systems, such as solar panels, installed. More than a dozen states offer exemptions for elderly homeowners and most offer tax relief for disabled military veterans. Exemptions typically only apply for homestead properties, which means the real estate is owner-occupied as a primary residence.

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