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.
How much you pay can vary widely by state. And if you want to deduct them from your taxes, you’ll have to itemize. And note that the federal government puts a cap on state and local tax deductions — known as SALT deductions to the pros — of $10,000 for a single person or a married couple filing jointly. Chances are your property taxes won’t meet that cap.
If they do, you’ll have to have enough other deductions to exceed the standard deduction of $12,000 for a single person and $24,000 for a married couple filing jointly.
Will you be able to itemize and take your SALT, or will you be in standard deduction land? This calculator can give you an estimate.
Here are some more facts about property taxes homeowners should know:
Local Property Taxes By State Vary Wildly
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 $3,000 a year in property taxes, according to tax policy nonprofit the Tax Foundation. That’s almost six times what a homeowner pays in Alabama, where the average property tax is $540 a year.
Highest and Lowest Property Taxes, By State
States with Highest Property Taxes:
- New Jersey $3,074
- New Hampshire $3,054
- Connecticut $2,847
- New York: $2,697
- Vermont: $2,542
States with Lowest Property Taxes:
- Alabama $540
- Oklahoma $678
- Arkansas $699
- New Mexico $770
- Kentucky $781
- Delaware $855
Source: Tax Foundation.org
States With No Income Tax Often Have Higher Tax Rates
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.
Nine states with no wage tax:
- New Hampshire*
- South Dakota
*Note: Tennessee and New Hampshire only tax interest and dividend income, not wages.
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.
Areas With Lower Home Values Tend to Have Higher Property Tax Rates
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.
Some of the highest property taxes by comparison are in the Midwest, where home values are relatively low, according to a Brookings Institution report. Higher home prices on the West Coast, meanwhile, make the effective tax burden small.
For example, the effective tax rate in Wisconsin is 2% of the median home value. In California, it’s less than half of that, 0.8 percent.
A Property Tax Exemption Can Significantly Reduce Your Bill
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.
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.
In Honolulu — where the median home price is $800,000, nearly triple the U.S. average — homeowners pay some of the lowest effective tax rates among big cities. This is partly because they don’t pay property taxes on the first $40,000 of their assessed home value.
Other factors can take the exemption up to $80,000. And for those over age 70, the exemption can be even higher.
What Property Taxes Fund
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 North Dakota, your property taxes are a scant 8.3 % of the revenue the state gets from all sources, including the federal government. In New Hampshire, property taxes generate 38% of state revenues.
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 tax rates in the nation: less than 1%! (0.862 of a percent, to be precise.)
Related: How to Appeal Your Property Tax