Where Are the Lowest Property Tax Rates?

Even if you have a fixed-rate mortgage, your monthly mortgage payment can change over time. That’s because most lenders include property taxes and homeowners insurance in the monthly payment, and those elements can change over time. Property values increase and tax rates can too.

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How Do Counties Calculate Property Taxes?

Counties base property taxes on the tax rate and the property value. The local assessor’s office periodically sends an appraiser to your home to evaluate its value for tax purposes. This person considers the value of similar properties in the area and the condition of the home.

The higher the home’s assessed value, the bigger your tax bill will be. Renovating your home, for example, can increase your property taxes. A strong local economy can cause your home’s value to rise as well as your property taxes.

Location, zoning and use

Your property’s location and zoning also influence the tax rate. Because taxes help fund school districts, infrastructure, and public services, they depend in part on how much revenue the county needs to pay for these services. When cities and counties require additional funds, they may increase your tax rate.

Even if you know the exact amount that a neighbor with the exact same home plan as yours pays in taxes, yours might be different anyway. Taxes can vary depending on how you plan to use the property. The homestead exemption allows a portion of your taxes to be discounted, but this exemption is reserved for primary residences only. If you’re purchasing a second property to use as a vacation home or rental, you won’t be eligible for this discount, which changes your taxes and your overall monthly payment.

Highest Property Tax Rates

Here are the five states with the highest property taxes on average:

  • Illinois (2.22%)
  • New Jersey (2.19%)
  • Texas (2.11%)
  • Vermont (2.11%)
  • Connecticut (2.04%)

Property taxes are typically set at the county level. The rates of these five counties show you how high property taxes can actually get. In 2019, the five counties with the highest property taxes (relative to home value) were:

  • Alcona County, MI (6.61%)
  • Bureau County, IL (4.17%)
  • Allegany County, NY (3.84%)
  • Salem County, NJ (3.79%)
  • Sullivan County, NY (3.55%)

Whenever you plan to buy a home and want to calculate an affordable price, consider property taxes. Moving one county away could save you enough in taxes to buy a nicer house.

Lowest Property Tax Rates

The states with the lowest property taxes on average are these five:

  • Hawaii (0.36%)
  • Alabama (0.48%)
  • Colorado (0.52%)
  • Utah (0.56%)
  • Nevada (0.58%)

And the five cheapest counties for property taxes are these:

  • Daphne, AL (0.33%)
  • Honolulu, HI (0.35%)
  • Montgomery, AL (0.38%)
  • Tuscaloosa, AL (0.39%)
  • Colorado Springs, CO (0.41%)

States with very low property taxes tend to make up for it with fewer services (or bad schools), higher personal income tax, or a higher sales tax. If taxes are a priority for you, make sure that you calculate the impact of all tax rates you’ll pay where you live.

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