Make no mistake about it: Depending on which state you live in, property taxes can be a major financial burden. According to a new report from WalletHub, the average American household spends $2,471 annually on real estate property taxes. "Real estate property taxes are taxes levied on real estate properties such as apartments, houses or even land," Jill Gonzalez, an analyst at WalletHub explains. "Tax rates are calculated separately by each jurisdiction, and the amount of the tax is determined by multiplying that rate by the assessed value of the property."
While the state of New Jersey has the highest property taxes in the United States — residents pay an average of $5,419 annually for property taxes — there are several locations where property taxes are well under half that amount. Curious which states have the lowest property taxes? Read ahead to find out where you'll find the lowest real estate tax rates in the country.
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Despite having the highest cost of living of any state in the country, Hawaii has the lowest property taxes in America. "Hawaii ranks first, as it has the lowest real estate tax rate, at just 0.28%," Gonzales says. "When taking into account the median home value in the United States ($217,500 according to the Census Bureau), the state's residents pay only about $600 in annual taxes on real estate, which is significantly below the national average." However, the median value for a home in Hawaii is about $615,300, so unless you secure a property for well under the market value, you can expect to pay around $1,715 in real estate taxes.
If you're searching for an affordable home with low property taxes to boot, look no further than the state of Alabama. Not only is the state's median home value ($142,700) well below the national average, Alabama has the second-lowest property tax rate (0.41%) in the country. "If we consider a home priced at the state's median value, Alabama residents spend about $587 annually on real estate taxes," Gonzales says.
While the median value of a home in Colorado is around $343,300 — more than $125,000 above the national home median price — the state's property tax rate is only 0.51%; the third-lowest in the country. "This means that Coloradoans spend about $1,100 annually on real estate taxes, based on the national median home value which is $217,500, or about $1,756, based on the state's median home value," Gonzales explains.
Not only is housing more affordable in Louisiana, where the state's median home value is $163,100, but the property taxes you'll pay are substantially lower than the national average, too. "Louisiana's real estate tax rate is 0.55%," Gonzales explains. "Adding to that low rate is the fact that the median home value in the state is lower than the national average, meaning residents pay about $890 in annual taxes on their properties."
5. District of Columbia
If you live in the District of Columbia, Gonzales says your real estate tax rate of 0.56% is the 5th lowest in the country. However, since the median price of a home in D.C. is around $601,500 — almost triple the price of the national average — you'll likely be paying thousands in property taxes despite the low rates. "Real estate here is significantly more expensive, causing residents to spend around $3,400 on average each year on taxes," Gonzales explains.