The federal tax law signed by President Donald Trump Dec. 22, 2017, may affect home ownership tax benefits described in this article. The new law goes into effect for the 2018 tax year and generally doesn’t affect tax filings for the 2017 tax year. Here’s a detailed summary of the changes.
No matter where you call home, chances are you’re paying property taxes to the city, the county, the school district, the state, or even all of these. Property taxes may be pervasive (and some would say invasive) but they’re not all are alike.
The property tax you pay can be a completely different amount than the tax your neighbor pays, thanks to property tax exemptions — discounts given to a particular group, like seniors, people with disabilities, or veterans.
The total property tax tab some homeowners pay would make you gasp, either because you can’t believe how much they pay — or how little. Take New Jersey. Homeowners there pay three and a half times more than the nation’s $2,075 median property tax, and 13 times more than the typical Alabama homeowner.
Highest and Lowest Property Taxes by State
|1. New Jersey||$7,183|
|3. New Hampshire||$4,987|
|4. New York||$4,402|
|2. West Virginia||$587|
|5. South Carolina||$765|
Source: U.S. Census Bureau’s American Community Survey, 2012
DID YOU KNOW?
The Sticker Price Isn’t Always the Price You Pay
How much can exemptions reduce a property tax bill? In some places, the exemptions are so generous that homeowners pay some of the lowest property taxes around, according to a property tax study from think tank Lincoln Institute of Policy:
- Honolulu homeowners, who have the highest median home prices of any state, also pay the lowest property taxes among big cities. They don’t owe property taxes on the first $80,000 of their home value.
- Washington, D.C., exempts $69,100.
- For 2014, Boston offered a $126,095 property tax exemption.
Here’s where other cities landed:
Highest and Lowest Property Taxes in 53 Biggest U.S. Cities
Source: The Lincoln Institute of Land Policy, 50-State Property Tax Comparison Study, March 2014
DID YOU KNOW?
In 1798, Revolutionary War hero Paul Revere’s property tax rate was 6% (ouch!). He paid $75 in property taxes on his Boston home, valued at $1,250. Today, Boston has among the lowest city property taxes.
Some Homeowners Pay High Taxes Even Though They Have Relatively Low Home Values
And vice versa.
Filter property taxes through the lens of housing values (which make a nice stand-in for cost of living) and you realize high home values don’t always lead to high property taxes.
Comparatively speaking, property taxes are highest in the Midwest, where home values are relatively low, according to a Brookings Institution 2014 analysis. Higher home prices on the West Coast, meanwhile, make the relative tax burden there seem small.
5 Counties Where Property Taxes are High Compared with Home Values
5 Counties Where Property Taxes are Low Compared with Home Values
Source: Tax Policy Center for the Urban Institute and Brookings Institution
See how your county compares using Brookings’ interactive map.
DID YOU KNOW?
South Dakota’s Shannon County, the second-poorest county in the U.S., and the county with high property taxes compared with home value, is home to the Pine Ridge Indian Reservation. It’s larger than Delaware and Rhode Island put together. The poorest U.S. county is Owsley, Ky.
States with Little or No Income Tax May Charge Higher Rates of Property Taxes
Generally, states that have little or no income tax charge property taxes 8% to 12% above the national average, according to the Center for Budget and Policy Priorities.
States with little or no income tax:
- New Hampshire*
- South Dakota
* New Hampshire only collects income tax on qualifying investment, dividend, and interest income.
** Tennessee imposes an income tax on those receiving interest from bonds, notes, stock dividends.
So you’d think states with high property taxes would have low income tax rates. Not always: California and Illinois have high income tax and high property tax burdens, the CBPP says. Every jurisdiction is different and the pattern doesn’t always work out in your favor.
DID YOU KNOW?
No-income-tax Alaska is the #1 most tax-friendly state for retirees, according to “Yahoo! Finance.”
So Maybe Your State Really Needs Your Property Tax Money
States charge taxes because they need money to pave roads, fund schools, and pay state troopers. Some states fund more of their budgets via property tax than others.
If you live in Arkansas, your property taxes are a scant 18.3% of the revenue the state takes in from all taxes. In Texas, property taxes generate nearly half (45.2%) of state tax revenues. Here’s a look at how your state compares:
Property Taxes % of All State Revenue
Remember, your property taxes are deductible.
You may not be happy about paying property tax but you can lessen your pain by deducting property taxes on your federal income taxes (if you itemize). Otherwise, you can always vote to put someone else in charge of setting your property tax rates during the next election.
Or move to the Cayman Islands.
Grand Cayman in the Cayman Islands has no property tax and there are about 200 homes for sale that cost $200,000 or less.
Related: How to Appeal Your Property Taxes