4 minute read
If you’re looking to purchase a home, you may be so focused on the neighborhood and the features of the home that you forget to take personal property taxes into account. Property taxes can account for a significant portion of the home’s cost depending on the local value of the homes and the local tax rates. While property taxes are the biggest source of revenue for local and state governments, it can be quite an expense for the taxpayer.
Property tax rates differ by state, making some states in the U.S. more expensive to live in over other states. If you want to narrow down your search for a home based on expense, here are the 25 states with the most expensive property taxes in the U.S.
First off, property taxes themselves are not a bad thing. Property taxes are paid by the property owner to the local or county tax authorities. The total amount is based on the home’s assessed value and the property tax rate for the state which can vary drastically from state to state. These fees are paid either through mortgage payments or billed by the local government.
The positive aspect of property taxes is what the money is used for. The money benefits your community by funding some crucial services like building and maintaining schools and paying teacher salaries. When it comes to public safety, property taxes finance the supplies and salaries for public safety workers such as police, firefighters, and EMTs. Property taxes are a source of revenue for constructing and maintaining public parks and recreational sites. Revenue generated from property taxes goes towards the construction and maintenance of roads, street cleaning, trash collection, and sewer & storm water management. Other services funded by property taxes include libraries, health departments, animal shelters, and other local social services.
While these are all good things, property taxes can cross a line where they begin to have a negative impact on the individual taxpayer. They can creep up to the point where they become a tax burden on homeowners.
In the chart below, based on WalletHub’s 2022 Property Taxes by State report, the home value represents the average value of a middle range single family home. If you multiply the average home value by the average state tax rate, you end up with the state’s average annual property tax. These are ranked starting with the lowest and ranging to the highest.
| Rank | State | Real Estate Tax Rate | Average Home Price | Annual Property Tax |
|---|---|---|---|---|
| 25 | Missouri | 0.97% | $157,200 | $1,526 |
| 24 | Oregon | 0.97% | $312,200 | $3,037 |
| 23 | North Dakota | 0.98% | $193,900 | $1,906 |
| 22 | Washington | 0.98% | $339,000 | $3,326 |
| 21 | Maryland | 1.09% | $314,800 | $3,430 |
| 20 | Minnesota | 1.12% | $223,900 | $2,500 |
| 19 | Alaska | 1.19% | $270,400 | $3,231 |
| 18 | Massachusetts | 1.23% | $381,600 | $4,679 |
| 17 | South Dakota | 1.31% | $167,100 | $2,195 |
| 16 | Maine | 1.36% | $190,400 | $2,585 |
| 15 | Kansas | 1.41% | $151,900 | $2,137 |
| 14 | Michigan | 1.54% | $154,900 | $2,381 |
| 13 | Ohio | 1.56% | $145,700 | $2,271 |
| 12 | Iowa | 1.57% | $147,800 | $2,315 |
| 11 | Pennsylvania | 1.58% | $180,200 | $2,852 |
| 10 | Rhode Island | 1.63% | $261,900 | $4,272 |
| 09 | New York | 1.72% | $313,700 | $5,407 |
| 08 | Nebraska | 1.73% | $155,800 | $2,689 |
| 07 | Texas | 1.80% | $172,500 | $3,099 |
| 06 | Wisconsin | 1.85% | $180,600 | $3,344 |
| 05 | Vermont | 1.90% | $227,700 | $4,329 |
| 04 | Connecticut | 2.41% | $275,400 | $5,898 |
| 03 | New Hampshire | 2.18% | $261,700 | $5,701 |
| 02 | Illinois | 2.27% | $194,500 | $4,419 |
| 01 | New Jersey | 2.49% | $335,600 | $8,362 |
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Property taxes are based on your home’s assessed value which varies depending on your state’s local property tax rate. The value of your real property includes both the land and all the structures on the land.
Assessments are determined by multiplying three factors: the state tax rate, the assessment ratio – the portion subject to tax – and the value of the property. Assessments are expressed in units called mills, which are equal to one thousandth of a dollar.
New Jersey has the most expensive property taxes in the U.S. While other states impose local sales tax and income tax, New Jersey does not. Local county, government, and school expenses are all paid out of property taxes.
There are several reasons why New Jersey’s property taxes are so high. New Jersey has a dense population which means it has more people per square mile. It costs more to run a municipality and to provide services such as public works in an area where there are more people.
Labor costs in New Jersey also drive the cost of property taxes up. Pay raises for public employees such as police officers and firefighters have been capped to help minimize the rise in property taxes.
Education costs are higher in New Jersey than any other state. The cost of education per pupil in New Jersey is the highest in the nation.
New Jersey’s state pension fund is also underfunded. In fact, it’s the worst funded in the nation. Property tax revenue is essential in keeping these pension plans funded.
Corvee tax planning software will help you find ways to benefit the most from your taxes, even if you live in a state with the most expensive property taxes in the U.S. Ensure your strategy on real estate is tax-advantaged. See how Corvee can help.
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