Key takeaways:
- Property tax rates by state range from 0.29% to 1.88%. The national average effective rate is 0.89%.
- The rate alone does not determine the bill.
- Some states with high property taxes rely heavily on them in lieu of other major tax categories. Other states impose high property taxes alongside high rates in the other major tax categories.
Property taxes are the primary tool for financing local governments and the largest source of local tax revenue in the United States, according to the Tax Foundation, a Washington, D.C.-based independent tax policy group. Local governments rely heavily on property taxes to fund schools, roads, police departments, fire and emergency medical services and other services associated with residency and property ownership.
For homebuyers, the property tax rate in a given state or county can meaningfully change the total cost of owning a home. Two homes with the same purchase price and mortgage rate can carry annual tax bills that differ by thousands of dollars depending on where they are located.
This guide explains how property taxes work, lists the effective rate for every state and the District of Columbia, and breaks down the states where homeowners pay the most and the least.
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What is an effective property tax rate?
A state's effective property tax rate is the total property taxes paid divided by the total value of homes, expressed as a percentage. This rate reflects what homeowners actually pay relative to their property's value, providing a clearer window for comparison than sizing up dollar amounts or statutory tax rates.
According to the National Association of Home Builders, the national effective property tax rate in 2024 was 0.89%, or $8.88 per $1,000 of home value.
Consider a home valued at $350,000. In Illinois, at an effective rate of 1.88%, the annual property tax bill would be about $6,580. In Hawaii, at 0.29%, the same home would produce a tax bill of about $1,015.
Which states have the highest property tax rates?
The top 10 states by effective property tax rate in 2024, according to the Tax Foundation, share a common pattern: Local governments bear a large share of the cost of funding public services, particularly K-12 education.
New Jersey and Illinois (1.88%) are tied for the highest effective property tax rate in the country. But the bills they produce are very different. New Jersey's median home price is approximately $505,000, which at a 1.88% rate produces an annual bill of roughly $9,494. Illinois's median home price is approximately $260,500, producing a bill of roughly $4,897. The rate is the same, but home values drive a nearly $4,600 gap in actual dollars paid.
Connecticut (1.54%) combines above-average home values with a high effective rate. Property taxes are levied at the municipal level, and rates vary significantly by town. Some communities carry rates well above the statewide average.
Vermont (1.51%) and New Hampshire (1.50%) are among the highest in the country despite being small states with relatively modest populations. New Hampshire has no state income tax and no general sales tax. Property taxes are the primary mechanism for funding local government and schools.
Nebraska (1.44%) rounds out the top of the ranking. Like several other high-rate states, Nebraska funds a significant share of local government services and school districts through property tax revenue.
Texas (1.40%) ranks seventh. Texas has no state income tax, making property taxes the primary funding source for local governments and school districts. On a median-priced home of approximately $320,158, a Texas homeowner would pay about $4,482 per year.
New York (1.30%) ranks 11th. Despite falling outside the top 10 in effective rate, New York's median home price of approximately $484,813 pushes its annual bill to roughly $6,303, one of the highest in the country in dollar terms.
Which states have the lowest property tax rates?
Low property tax rates do not always mean low total tax burdens. Many of the states with the lowest property tax rates make up the revenue elsewhere, through income taxes, sales taxes or tourism-related revenue.
Hawaii (0.29%) has the lowest effective property tax rate in the country. But Hawaii also has the highest median home prices in the nation, at roughly $683,333. On a home at that price, the annual property tax bill would still be approximately $1,982. The state relies more heavily on income taxes and a general excise tax to fund government services.
Alabama (0.37%) has both a low effective rate and low median home prices, at roughly $244,967. That combination produces one of the lowest annual property tax bills of any state, approximately $906 per year. Alabama's homestead exemption further reduces what owner-occupants owe.
Louisiana (0.55%) keeps rates relatively low in part through a generous homestead exemption that shields the first $75,000 of a home's market value from parish (county) taxes. On a median-priced home of approximately $228,800, the annual bill comes to about $1,258.
Arizona and Utah (0.48%) offer low rates, though Utah's median home price of roughly $510,667 means the annual bill still reaches approximately $2,451. Arizona's median of roughly $423,333 produces a bill of about $2,032.
South Carolina (0.49%) keeps its effective rate low in part because South Carolina taxes owner-occupied homes at 4% of market value, which significantly reduces the taxable base.
Why do property tax rates differ so much between states?
The gap between the highest and lowest effective rates spans roughly 1.6 percentage points. Several factors explain why, according to the Tax Foundation:
Funding structure. States without an income tax (Texas, New Hampshire, Florida, Nevada, Washington, Tennessee, South Dakota and Wyoming) often rely more on property taxes, though other revenue sources, such as tourism or oil, can offset this reliance.
Assessment practices. Some states tax at full market value; others use assessment ratios. The assessment method determines how much of a home's value is subject to taxation.
Local control. Property taxes are set by local jurisdictions. States that give more authority to local governments tend to have higher rates because more services are funded locally.
Caps and limitations. Some states limit how fast assessed values or rates can grow. California's Proposition 13, Colorado's Taxpayer's Bill of Rights and Nevada's tax caps limit how high rates can go.
Exemptions. Homestead exemptions, veteran exemptions and senior freezes reduce what homeowners pay. These vary widely by state.
Home values. High home values can produce high tax bills even at low rates (Hawaii). Low home values can produce low bills even at moderate rates (West Virginia).
Urban vs. rural. Urban areas tend to pay more because of higher home values and higher government service costs. Rural areas pay less.
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How are property taxes assessed?
To know what a property owner owes in taxes, local governments first have to assess the value of a home and the land on which it sits. This process can happen as often as annually or as infrequently as every eight years, as is the case in some North Carolina counties.
Each government sets a tax rate annually and applies it to the home value to determine the tax amount. When tax assessments are rising quickly, local governments sometimes choose to lower the rate to reduce the impact for owners, or they may opt to assess properties more often so that the sting of higher bills is phased in.
The property tax is based on the value of a holding, but not necessarily all of it. Many states assess only a portion of that value, providing what's often called a "homestead exemption" on the rest.
Who collects property taxes?
Cities, towns and counties usually collect taxes, but in some places, school boards, fire departments and utility commissions set their own tax rates. In some states, a portion of the taxes that homeowners pay to their local government actually goes to the state. For example, in Kansas and New Hampshire, the state uses that money to pay part of the costs of public schools.
People who finance their homes with a loan typically have their property tax bundled into their monthly mortgage payment. Each year after a local government sets the tax rate or after a reassessment is completed, the mortgage amount will change based on that new information. Some homeowners who own their homes outright pay the tax bill directly to the locality.
Are there property tax breaks for seniors and veterans?
It's common for local and state governments to offer tax abatements to certain populations who qualify, such as older residents on fixed incomes or disabled veterans. Alaska exempts from taxation the first $150,000 in assessed value for the primary homes of people aged 65 or older, according to the National Association of Counties.
Many states also offer homestead exemptions that reduce the taxable value of a primary residence for all homeowners, not just seniors or veterans. The size of the exemption varies. In Texas, the homestead exemption for school district taxes reduces a home's taxable value by $140,000. In Alabama, the exemption can eliminate the state portion of property tax entirely for owner-occupied homes.
Buyers should check with the county assessor's office in any market they are considering to understand which exemptions are available and how to apply.
What homebuyers should know about property taxes
Property taxes are not a one-time cost. They recur annually and can change. Here are the key points to keep in mind:
- Check the local rate, not just the state average. Rates can vary significantly between counties and cities within the same state.
- Factor taxes into your monthly payment. Use the Homes.com mortgage calculator to see how property taxes affect your total monthly housing cost.
- Ask about exemptions. Homestead, veteran and senior exemptions can meaningfully reduce your annual bill.
- Understand that taxes can increase. Local governments can adjust tax or mill rates, and your home's assessed value can change during reassessment. Some states limit annual increases, but most allow periodic changes.
- Consider the total tax picture. A state with a low property tax rate may have a high income tax or sales tax. The total cost of living depends on all of these factors, not just one.