States with the Highest and Lowest Property Taxes
If you’re a homeowner, you know that there are many additional costs associated with your home other than the listing price. One of these costs, of course, being property taxes. Depending on where you reside, property taxes can be financially inconvenient and can even become a major burden. Wallethub reports that “the average American household spends $2,197 on property taxes for their homes each year, according to the U.S. Census Bureau.”
So where does your state rank when it comes to property tax rates? Check out the states with the lowest and highest property taxes!
Property taxes are computed by taking the current market value of your property times the tax rate, and the tax rate is recalculated each year in most places. They are usually assessed by the local government and are used by the governing body of the jurisdiction in which the property is located. Taxes collected on properties are used to “fund education, road and highway construction, public servants, and other services which benefit the community,” according to Investopedia.
It’s no surprise that Hawaii is an expensive state to live in. However, the property taxes are actually favorable for homeowners. The state brings in taxation revenue from many other sources, such as tourism, and therefore does not depend on property taxes to fund their operations. With a property tax rate of just 0.27%, many not nonresidents of Hawaii invest in properties, creating a competitive real estate market.
Since the tax rate is recalculated each year in most places, it is likely to slowly increase. Many homeowners do not tend to notice any changes in their taxes because they pay for them through an escrow account. Managed by mortgage companies, homeowners can opt-in to pay taxes and homeowners insurance through an escrow account to receive a single monthly bill that includes their mortgage and escrow payments, which spread the cost of property taxes over a six or 12-month period. If a homeowner chooses not to pay through an escrow account, they are liable to pay them on their own.
Not paying property taxes can potentially lead to a foreclosure on your home. According to the National Tax Lien Association, $14 billion in property tax go unpaid each year. The payment schedule for property taxes varies by locality. When the payments are left unpaid, the taxing authority may assign a lien against the property. This is a legal claim against the property for the unpaid owed amount. Once the taxes are paid, the lien is removed and the property can be sold or refinanced.
While high property taxes may seem like a burden sometimes, they aren’t a bad thing, especially if you are looking for a good school system. 45% of school funding comes from local money sources such as property taxes.
The Smart Asset website provides a property tax calculator that you can use to find local property tax rates by ZIP Codes and get an estimate of annual property taxes based on assessed valuation of a home.