Which States Don’t Have a Property Tax?
While all states have property taxes, their impact varies. This guide explains how to look beyond a single tax to understand a state's true cost.
A common question from those evaluating housing costs is which states have no property tax. The direct answer is that no state is entirely free from property taxes. This is because property tax is a fundamental component of local, rather than state, government funding, which is used to pay for community services.
The Reality of State vs Local Property Taxes
Property tax is an ad valorem tax, meaning it is based on the value of a property. It is not levied by the state government but by thousands of local government entities, including counties, cities, and school districts. These local bodies set their own tax rates based on their budgetary needs, which is why rates can vary significantly between neighboring towns.
The revenue generated from these taxes is the primary funding source for public education, police and fire departments, road maintenance, libraries, and parks. Because these services are managed at the local level, every state relies on this funding mechanism.
The process begins when a local assessor determines the property’s assessed value. Each local taxing district then sets a tax rate, often expressed as a “mill rate,” where one mill equals $1 of tax for every $1,000 of assessed value. A homeowner’s final tax bill is the sum of the rates from all applicable local jurisdictions multiplied by the property’s assessed value.
States with the Lowest Effective Property Tax Rates
To compare property tax burdens across the country, the “effective property tax rate” is the most accurate metric. This rate represents the average annual property tax paid as a percentage of a home’s market value. It provides a standardized measure that accounts for differences in home prices and local assessment practices between states.
Hawaii has the lowest effective property tax rate in the nation at 0.27%. Despite having the country’s highest median home values, the low rate keeps tax bills relatively modest. Alabama follows with an effective rate of 0.39%. The state’s lower median home values result in some of the smallest annual property tax payments for homeowners.
Colorado features an effective property tax rate of 0.49%, and Nevada’s is 0.50%. Louisiana’s rate is 0.55%, which, combined with modest home values, results in a median annual tax payment nearly $2,000 below the national average. Other states with low effective property tax rates include South Carolina, West Virginia, and Utah.
Understanding the Total Tax Burden
A low property tax rate does not automatically mean a low-tax environment. To assess a state’s affordability, consider the “total tax burden,” which is the proportion of personal income residents pay toward all state and local taxes. This includes property, individual income, and sales taxes. States with low property taxes often compensate with higher rates in other areas.
For example, Texas has no state income tax but relies more heavily on property and sales taxes, resulting in an effective property tax rate well above the national average. Conversely, a state might have a moderate income tax but a very low property tax rate. This leads to different financial outcomes for residents depending on their income and property value.
A high-income renter might fare better in a state with high property taxes but no income tax. In contrast, a retiree living on a fixed income in a valuable home might prefer the opposite. Evaluating the total tax burden provides a more complete picture of a state’s affordability.
Common Property Tax Relief Programs
Even in states with higher tax rates, homeowners can often lower their bills through relief programs. The most common is the homestead exemption, which allows homeowners to exempt a portion of their home’s value from taxation if it is their primary residence. An exemption might reduce a home’s assessed value by $50,000 or more, directly lowering the tax liability.
Many jurisdictions offer tax relief for senior citizens and disabled individuals. These programs can include an additional exemption or a “tax freeze” that locks in a home’s assessed value once the owner reaches a certain age. Eligibility is often based on age, disability status, and income, with thresholds that vary by location.
Veterans with service-connected disabilities are often eligible for property tax reductions or full exemptions, with the benefit level depending on their disability rating. These programs are not always applied automatically. Homeowners should contact their local county assessor’s office to apply for any benefits for which they may be eligible.