Property taxes are a crucial aspect of homeownership in the United States, affecting everything from monthly mortgage payments to long-term financial planning.
A new study by Maptive has shown which states will have the highest and lowest property taxes in 2024.
What is property tax?
Property tax is a levy levied by local authorities on real estate, primarily to finance public services such as schools, roads and emergency services.
This tax is based on a property’s assessed value, which is usually determined by local tax assessors. The appraisal process involves estimating the property’s market value, often using methods such as comparing recent sales of similar properties, calculating replacement cost less depreciation, or evaluating the property’s income potential. Once the property’s assessed value is determined, the local government applies a tax rate, known as the millage rate, to determine the amount of tax owed.
The tax rate is expressed as a rate per $1,000 of assessed value. For example, a tax rate of 20 means $20 is charged per $1,000 of the property’s assessed value. Property taxes are often collected by multiple entities, such as counties, cities, and school districts, each of which sets its own tax rate.
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Top 5 states with the highest property taxes
- New Jersey: With an average effective property tax rate of 2.47 percent, New Jersey tops the list of states with the highest property taxes. Homeowners in the state pay an average of $8,928 per year for a median-priced home.
- Illinois: Illinois follows closely behind with a property tax rate of 2.29 percent, resulting in an average annual tax of $5,213 for a median-priced home.
- Connecticut: The effective property tax rate in Connecticut is 2.16 percent, resulting in an average annual tax of $6,251 for a typical home.
- New Hampshire: In this state, the effective property tax rate is 2.09 percent, with homeowners paying about $6,235 annually for a median-priced home.
- Texas: In Texas, the property tax rate is 1.90 percent, which equates to an average annual tax of $4,399 for a median-priced home.
Top 5 states with the lowest property taxes
- Hawaii: Hawaii has the lowest property tax rate in the country at 0.29 percent. Homeowners here pay an average of $1,915 per year for a median-priced home.
- Alabama: With a property tax rate of 0.43 percent, Alabama residents pay about $742 annually in property taxes for an average-priced home.
- Colorado: In Colorado, the property tax is 0.52 percent, resulting in an average annual tax of $2,125 for a median-priced home.
- Nevada: In Nevada, the effective property tax rate is 0.55 percent, with homeowners paying about $1,793 annually for a median-priced home.
- Utah: Utah rounds out the list with a property tax rate of 0.57 percent, resulting in an average annual tax of $1,972 for a typical home.
Rising property tax rates
In recent years, property tax rates in the United States have increased due to rising property values and changing requirements from local governments. In 2024, there were significant changes to property taxes, with states taking various measures to either reduce or increase the tax burden on homeowners.
Nationally, the average property tax for single-family homes increased 4.1 percent in 2023, primarily due to rising property values.
From 2019 to 2023, the average property tax for single-family homes in the United States increased by about 24 percent. This trend has particularly affected new homeowners, many of whom were surprised by higher property taxes than expected.
As property values and property tax burdens continue to rise, the financial burden on homeowners could increase, making it more important than ever to be familiar with the property tax landscape.
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