Ranking All 50 U.S. States by Property Tax Rates

09/16/2024

Industry Insights

Ranking All 50 U.S. States by Property Tax Rates (Residential & Commercial)

Property taxes are a major component of real estate carrying costs for homeowners and investors alike. These taxes fund local services like schools, infrastructure, and public safety, but the rates can vary dramatically from state to state. For example, New Jersey’s effective property tax rate is about 2.2% of a property’s value – the highest in the nation – while Hawaii’s is around 0.3%, the lowest according to WalletHub. Such disparities mean that identical properties could face very different tax bills depending on their location. Understanding where each state stands can help real estate investors and developers factor taxes into their investment decisions.

In this guide, we’ll rank all 50 U.S. states by their property tax rates for both residential and commercial real estate. We’ll also discuss how property taxes are calculated, identify states with the lowest overall carrying costs (when you consider insurance, maintenance, HOA fees, and utilities), and examine whether high-tax states ever justify their cost through benefits like strong markets or better infrastructure. Finally, we’ll outline strategies investors can use to reduce their property tax burden – from contesting assessments to leveraging tax-saving transactions. Let’s dive in.

How Property Taxes Are Calculated

Property tax bills are determined by two key factors: the assessed value of the property and the local tax rate (often expressed as a “mill rate”). The assessed value is an estimate of your property’s worth for tax purposes, typically calculated by a county or municipal assessor. It may be a percentage of market value (some states assess residential property at a fraction of its market value) or equal to full market value. Once the assessment is set, the mill rate (or millage rate) is applied. One “mill” equals $1 in tax per $1,000 of assessed value. For example, if a property is assessed at $200,000 and the local tax rate is 20 mills, the annual property tax would be $4,000.

These rates are usually set by local jurisdictions (counties, cities, school districts), so the total property tax in an area might include multiple components. Some states also have statewide property taxes or mandated county levies that add another layer. Furthermore, different classes of property can be taxed at different effective rates due to exemptions or assessment ratios. For instance, a state might assess commercial properties at a higher percentage of value than residential homes, or offer homestead exemptions that reduce the taxable value for owner-occupied residences. As a result, effective tax rates (the percentage of market value paid in tax) can differ between residential and commercial real estate within the same state.

Local budget needs and policies play a big role as well. Many jurisdictions adjust rates annually based on funding requirements, and some states have caps or limits to prevent sudden spikes in tax bills (for example, California’s Prop 13 limits annual assessment increases). Understanding the basics of how taxes are calculated – assessed value × tax rate – gives investors a foundation to estimate potential costs and to spot when a property’s tax bill might be higher (or lower) than expected. Next, let’s see how each state stacks up in terms of property tax rates.

Ranking: All 50 States by Property Tax Rates

Below we rank all 50 states by their average effective property tax rates, first for residential properties and then for commercial properties. The effective tax rate is the percentage of a property’s market value that is paid in taxes annually. (Note: Washington, D.C. is not a state and is excluded from these rankings.) Keep in mind these are statewide averages – individual counties or cities within a state may have higher or lower tax rates.

Residential Property Tax Rate Rankings (Lowest to Highest)

Hawaii – ~0.32% (lowest residential property tax rate in the U.S.)
Alabama – ~0.40%
Colorado – ~0.55%
Louisiana – ~0.56%
Wyoming – ~0.56%
South Carolina – ~0.57%
Utah – ~0.57%
West Virginia – ~0.57%
Nevada – ~0.59%
Delaware – ~0.61%
Arizona – ~0.63%
Arkansas – ~0.64%
Idaho – ~0.67%
Mississippi – ~0.67%
New Mexico – ~0.67%
Tennessee – ~0.67%
Montana – ~0.74%
California – ~0.75%
North Carolina – ~0.82%
Kentucky – ~0.83%
Indiana – ~0.84%
Virginia – ~0.87%
Washington – ~0.87%
Oklahoma – ~0.89%
Florida – ~0.91%
Georgia – ~0.92%
Oregon – ~0.93%
North Dakota – ~0.98%
Missouri – ~1.01%
Alaska – ~1.04%
Maryland – ~1.05%
Minnesota – ~1.11%
Massachusetts – ~1.14%
South Dakota – ~1.17%
Maine – ~1.24%
Kansas – ~1.34%
Michigan – ~1.38%
Rhode Island – ~1.40%
New York – ~1.40%
Pennsylvania – ~1.49%
Iowa – ~1.52%
Ohio – ~1.59%
Wisconsin – ~1.61%
Nebraska – ~1.63%
Texas – ~1.68%
Connecticut – ~1.79%
Vermont – ~1.83%
New Hampshire – ~1.93%
Illinois – ~2.08%
New Jersey – ~2.23% (highest)

As you can see, the states with the lowest property tax rates for homes are generally in the South and West. Hawaii, Alabama, and Colorado top the list with extremely low effective tax rates. On the other end, the highest property tax burdens for residential real estate are found in the Northeast and Midwest – New Jersey, Illinois, New Hampshire, Connecticut, and Vermont all have effective rates well above 1.5%. This means owning property in those states will incur significantly higher annual taxes relative to the property’s value.

For commercial properties, we see a similar spread but with a few differences. Wyoming and Alabama remain at the top as the most tax-friendly states for commercial real estate (both under 1% effective). Other Southern and Western states like Virginia, North Carolina, Nevada, and Oregon keep commercial taxes around the 1% mark as well. On the other hand, the highest commercial property tax rates are concentrated in states like Kansas, New York, Illinois, Pennsylvania, and Indiana – all approaching or exceeding a 3% effective tax rate on a commercial property’s value. Notably, some states that were moderate on residential taxes rank much higher for commercial taxes. For example, Indiana and Kansas have relatively affordable residential rates but impose very heavy taxes on commercial properties (due in part to different assessment rules and fewer exemptions on business property).

The takeaway from these rankings is that the tax landscape varies not only by geography but also by property type. States like Wyoming or Alabama offer across-the-board low property taxes, making them attractive for both homeowners and investors. Meanwhile, states such as New Jersey or Illinois will significantly raise the carrying costs of owning real estate, especially for commercial or investment purposes. Investors must account for these differences when comparing opportunities in different states.

States with the Lowest Carrying Costs

Property tax is just one piece of the puzzle when evaluating the ongoing costs of owning real estate. Other expenses – including hazard insurance, maintenance, homeowners association (HOA) dues, and utilities – can vary by region. When we consider the full spectrum of carrying costs, a number of states stand out for their overall affordability. These states tend to have low property taxes and relatively low costs for insurance and basic utilities, making them especially attractive for cost-conscious investors:

Alabama: Alabama consistently ranks among the lowest in property tax burden, and homeowners insurance costs are relatively modest (except in some coastal areas). The state’s mild climate also means lower heating costs in winter.
Tennessee: With property tax rates around 0.6–0.7%, Tennessee is quite tax-friendly. It also has no state income tax on wages and generally reasonable insurance premiums (no frequent hurricanes or expensive catastrophic risks). These factors, combined with moderate utility costs, keep carrying costs low for investors.
West Virginia: West Virginia’s property taxes are very low (roughly 0.5–0.6%). Additionally, insurance costs in the Mountain State tend to be cheap – it’s largely free from the hurricanes, wildfires, and tornadoes that drive up premiums elsewhere. Maintenance and housing costs are also among the most affordable in the nation.
Arkansas: Arkansas offers low property taxes (around 0.6%) and a low overall cost of living. Home insurance rates are on the lower side (the state sees some storms but not the extreme weather of Tornado Alley’s core or coastal hurricanes). For investors, affordable labor and materials in Arkansas can also keep maintenance costs down.
Mississippi: Mississippi has one of the lowest median home prices and low property taxes (roughly 0.7%). While coastal Mississippi requires higher insurance for hurricane risk, much of the state faces fewer disasters, keeping insurance premiums cheap. Combined with inexpensive utilities and taxes, carrying costs in Mississippi are among the lowest.
Kentucky: Property tax rates in Kentucky are below the national average (around 0.8%), and insurance costs are relatively low since the state avoids the worst of coastal and plains weather extremes. Kentucky’s utility costs are also affordable (partly thanks to local energy production), which helps keep monthly property expenses manageable.
Idaho: Idaho’s effective property tax rate is roughly 0.6–0.7%, and it experiences few natural disasters – translating to low homeowners insurance premiums. Many parts of Idaho also have relatively low utility costs (for instance, hydroelectric power contributes to cheaper electricity). Overall, investors find that owning property in Idaho comes with comparatively low ongoing expenses.
Wyoming: Wyoming not only boasts the lowest property tax rates in the country, but it also has no state income tax – a bonus for overall investment returns. Insurance costs are minimal given the low incidence of natural disasters. Winters are cold, but the state’s energy costs are relatively low (Wyoming is a coal and gas producing state), which helps with heating bills. For investors, Wyoming’s low taxes and fees across the board make it extremely attractive for holding property long-term.
Utah: Utah’s property taxes are quite low for owner-occupied homes (under 0.6%), and even for investment properties the effective rate is moderate. More importantly, Utah has some of the lowest homeowners insurance rates in the nation (due to very low disaster risk). Many Utah properties are newer and energy-efficient, which can further reduce maintenance and utility costs, keeping overall carrying costs down.

Each of these states offers a combination of low taxes and other cost advantages. Of course, investors should still research specific locales (for example, insurance in a flood-prone part of West Virginia might be higher, or an HOA in a Tennessee condo could add fees). But in general, these states provide a favorable environment for minimizing the ongoing expenses of property ownership.

High Property Tax States – Are They Worth the Cost?

It’s natural for investors to be wary of states like New Jersey, Illinois, New York, or Connecticut, where property taxes can be two to three times the national average. High property taxes undeniably eat into rental income and increase the cost of ownership. However, a high-tax state can still offer strong real estate returns if other factors align in its favor.

One consideration is that areas with higher taxes often have robust economies, desirable locations, or limited supply – all of which can drive up property values and rents. For example, New York City (while unique in many ways) has very high property taxes on multifamily and commercial buildings, yet it remains one of the most sought-after real estate markets in the world. Investors pay those taxes because they can still earn solid returns from premium rents and long-term appreciation in a global economic hub. Similarly, northern New Jersey towns charge steep taxes, but offer proximity to New York City, strong tenant demand, and top-rated schools (which in turn keep property values high and attractive to renters).

High property taxes often fund excellent public services and infrastructure that make an area more livable and appealing. Illinois and New Jersey, for instance, use property taxes to support local schools, which can attract families and sustain housing demand. In such areas, landlords might find it easier to keep properties rented to quality tenants willing to pay premium rents – partially offsetting the tax costs. Additionally, in some high-tax markets, purchase prices of properties are lower relative to the rent they can produce (because the tax burden is “priced in”). An investor who buys a rental property in upstate New York or suburban Chicago might acquire it at a discount (compared to a similar property in a low-tax state), which can mean a better cap rate even after paying the high taxes.

The key is careful deal analysis. In a high property tax state, investors need to underwrite conservatively and ensure the rental income or expected appreciation justifies the expense. Often, investors in these markets will seek properties with strong cash flow potential or unique value-add opportunities that can boost net income (to cover the taxes). Some also proactively appeal assessments or take advantage of any local tax abatements to mitigate the impact. In short, while high-tax states impose a heavier burden, they can still be “worth it” for real estate investment when their other advantages – be it location, economic growth, or property undervaluation – create an attractive risk/reward profile.

How Investors Can Reduce Property Tax Burdens

Whether you invest in a high-tax state or not, it’s always smart to manage and minimize your property tax liability where possible. Here are several strategies investors use to reduce property tax burdens:

Contest your assessment: Don’t assume your property’s assessed value is set in stone. If you believe it’s assessed too high relative to market value (or compared to similar properties), you can file an appeal with the local assessor or board of review. Providing evidence – such as recent comparable sales at lower values or documentation of any issues that might reduce your property’s value – can lead to a lowered assessment and a lower tax bill. Many investors routinely review their property tax assessments and formally contest them when they seem out of line.
Seek out tax abatements and exemptions: Many localities offer tax abatement programs or exemptions to encourage certain types of development or occupancy. For example, cities might abate (reduce or eliminate) property taxes for the first 5–10 years on new construction or on significant rehabilitation projects to incentivize improvements. Some states also provide partial exemptions for things like historic buildings, affordable housing projects, or primary residences (homestead exemptions) which can benefit owner-occupant investors. By investing in properties or projects that qualify for these programs, you can substantially cut your tax costs, at least for a period of time.
Be strategic in what and where you buy: When comparing investment opportunities, factor in property tax rates as part of your due diligence. Sometimes, an investment that looks great on paper can be far less attractive after accounting for a high tax rate. You might choose to target counties or states known for more moderate taxes, especially if your strategy relies on slimmer margins. Even within the same metro area, crossing a county line can mean a big difference in tax bills. Additionally, for commercial real estate, consider lease structures like triple-net (NNN) leases where the tenant is responsible for property taxes – this doesn’t reduce the taxes per se, but it transfers the ongoing cost to the tenant, protecting your net operating income.
Use 1031 exchanges to reposition assets: A Section 1031 exchange allows real estate investors to sell one property and buy another “like-kind” property while deferring capital gains tax on the sale. Investors can use this to their advantage by exchanging out of high-tax jurisdictions and into properties in lower-tax states. For example, you might sell a property in a high-tax state like New Jersey and reinvest those funds into a property in a low-tax state like Florida or Alabama, all under a 1031 exchange. While the 1031 exchange doesn’t directly lower property taxes, it enables you to reallocate your portfolio without tax friction – potentially moving your capital into more tax-efficient markets.

In addition to the above, it’s wise to stay informed about local tax laws and any changes. Some jurisdictions periodically reassess property values, which can lead to big jumps in tax bills – savvy investors monitor these cycles and plan acquisitions or appeals accordingly. Ultimately, proactively managing your property taxes through appeals, smart acquisitions, and strategic use of tax laws can save you a significant amount of money over the long term.

Final Takeaways & Call to Action

Choosing where to invest in real estate involves balancing many factors, and property taxes are a crucial one. High property taxes can erode your returns, while low taxes can enhance cash flow – but it’s important to consider the whole picture. Often, states with higher property taxes offer strengths like strong job markets, high rental demand, or excellent long-term appreciation potential. Meanwhile, low-tax states can be great for maximizing income, but investors should also ensure there’s sufficient demand and growth to support their investment goals.

The bottom line is that investors should go in with eyes open: always include property tax implications in your financial modeling, and take advantage of any tools at your disposal to manage those costs. Whether you opt for the low-tax allure of states like Wyoming and Alabama or pursue opportunities in higher-tax markets like New York and New Jersey for their other benefits, understanding the tax landscape will help you make better investment decisions.

If you’re looking to explore real estate opportunities in tax-friendly states, or anywhere across the country, our platform can help. Brevitas offers a robust marketplace of commercial and investment properties, with filtering tools to target the locations that fit your criteria.

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