As a real estate investor, it’s important to examine all factors when you’re considering purchasing a property for investment purposes. Some of the most important considerations include property location, valuation, and taxation. Because of this, many investors choose to buy in states with the lowest property tax.
All states impose a property tax on homes that is charged to the owner. This tax may be imposed as a base amount per $1,000 on the fair market value, or it may be charged as a percentage of the overall market value of the property.
The location of the property and its overall value determine the amount of tax that is payable each year. The valuation of a property is reassessed on an annual basis, and taxes can fluctuate significantly. Thus, it’s important to make a careful assessment of expected taxes before jumping into an investment that may result in unexpected costs.
Quicken Loans calculated the effective property tax rate by state utilizing 2019 calendar data from the Tax Foundation. This information has been combined with the average home prices by state for June 2021 prepared by the Motley Fool to provide the comprehensive list of states with low property taxes below.
It’s important to remember that these are only averages. Property taxes vary by city and can be significantly higher or lower than the state average. In addition, a low property tax percentage combined with high home costs can lead to higher taxes than might be expected.
States with the Lowest Property Tax
States with lower property taxes tend to be located in the Southeast. Home values in these locations are also lower (on average) than in other parts of the country.
However, before opting to invest in an inexpensive location, you should consider more factors. Other elements could include tenancy rates and the increase in property valuation over time.
West Virginia
Effective annual property tax rate: 0.53%
Median home price: $117,768
Average yearly property tax: $624.17
Alabama
Effective annual property tax rate: 0.37%
Median home price: $170,184
Average yearly property tax: $629.68
Mississippi
Effective annual property tax rate: 0.63%
Median home price: $140,818
Average yearly property tax: $887.15
Arkansas
Effective annual property tax rate: 0.61%
Median home price: $149,120
Average yearly property tax: $909.63
Louisiana
Effective annual property tax rate: 0.51%
Median home price: $187,844
Average yearly property tax: $958.00
South Carolina
Effective annual property tax rate: 0.53%
Median home price: $225,406
Average yearly property tax: $1,194.65
Oklahoma
Effective annual property tax rate: 0.83%
Median home price: $150,754
Average yearly property tax: $1,251.26
Kentucky
Effective annual property tax rate: 0.78%
Median home price: $168,998
Average yearly property tax: $1,318.18
Wyoming
Effective annual property tax rate: 0.51%
Median home price: $273,992
Average yearly property tax: $1,397.36
Tennessee
Effective annual property tax rate: 0.63%
Median home price: $231,682
Average yearly property tax: $1,459.60
Highest Property Tax by State
In contrast to states with the lowest property tax, below you’ll find a list of states with the highest effective property taxes. Note that some states have a relatively low effective property tax percentage, but the median home prices are high. California is an example of this.
New Jersey
Effective annual property tax rate: 2.13%
Median home price: $408,517
Average yearly property tax: $8,701.41
New Hampshire
Effective annual property tax rate: 1.89%
Median home price: $366,129
Average yearly property tax: $6,919.84
Massachusetts
Effective annual property tax rate: 1.08%
Median home price: $518,203
Average yearly property tax: $5,596.59
Connecticut
Effective annual property tax rate: 1.73%
Median home price: $318,096
Average yearly property tax: $5,503.06
Vermont
Effective annual property tax rate: 1.76%
Median home price: $299,998
Average yearly property tax: $5,279.96
Rhode Island
Effective annual property tax rate: 1.37%
Median home price: $372,809
Average yearly property tax: $5,107.48
New York
Effective annual property tax rate: 1.30%
Median home price: $371,880
Average yearly property tax: $4,834.44
California
Effective annual property tax rate: 0.70%
Median home price: $683,996
Average yearly property tax: $4,787.97
Illinois
Effective annual property tax rate: 1.97%
Median home price: $233,661
Average yearly property tax: $4,603.12
Washington
Effective annual property tax rate: 0.84%
Median home price: $519,552
Average yearly property tax: $4,364.24
Final Considerations
While states with the lowest property taxes and home value should form part of an investor’s decision when purchasing an investment property, there are many other factors at play. Make sure you fully consider all aspects of your purchase before making the jump!
Written by
