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Property taxes remain the primary source of income for state governments. Tax money funds state-funded education systems, healthcare facilities, transportation infrastructure, and security services.
The property tax you’re assessed depends on where you live. In some states, like Hawaii, the property tax rate is as low as 0.30%. Other states like New Jersey levy a property tax rate as high as 2.21%.
If you’re looking for states that don’t have property taxes, you might be disappointed to learn that you won’t find one. States need revenue to operate and deliver basic services, and the money generated from property taxes do just that. There is a silver lining though: some states have lower tax rates than others.
Hawaii is a state that levies the lowest property tax rate in the United States at 0.26%. However, the median home value is higher there.
After Hawaii, Alabama has the second-lowest property tax rate at 0.40%. Unlike Hawaii, the median home price in Alabama is significantly lower. This makes it one of the most affordable states to live in.
Louisiana ranks third in the U.S. for low property taxes. The effective tax rate in Louisiana is 0.52%, making it one of the most affordable states in the U.S.
When it comes to states with low property taxes, Wyoming takes the fourth spot with a property tax rate of 0.55%. However, the flip side is that the median home prices in Wyoming are not as low as that of Alabama.
West Virginia is also an ideal place to move to if you are looking for reasonable property tax rates; the state’s tax rate is 0.55%.
The property tax rate in South Carolina is 0.56% but the median sales price is quite low which makes it a good choice to move to.
The effective property tax rate in Colorado is similar to South Carolina, which is 0.56%. Colorado is not as to live in–the median home prices in the state are higher.
Property taxes are customized by the local municipality, but generally, it is calculated by one of the following ways:
The Property Tax is calculated annually based on one of the following methods:
For commercial and business properties, property tax is calculated based on the net rental income the owner would earn by renting out the property. Total costs and other expenses are subtracted before applying the tax assessment.
Property tax is also measured by comparing similar properties that have recently sold in the area. With this method, features of the property are taken into consideration which can influence the value of the property.
In this method, the rebuilding cost of the property is used to calculate the tax. While calculating the property tax, the value of the land or the lot the house sits on plus the depreciation factor into the final rate.
Once the market value of the property is determined, the tax rate is applied to the market value of the home to calculate the property tax. The tax notice, which documents the assessed property value and tax bill, is sent to the owner.
Bear in mind that the assessed property value doesn’t translate to the fair market value of the property; the fair market value depends on other factors, particularly market trends or the median home prices in the surrounding area.
Let’s be very clear: there is no escape from paying property taxes. However, there are things you can do to keep the tax rate low:
Having said all that, if you are still wondering about state property taxes, let me reiterate that there is no such thing as a state that doesn’t assess a property tax. Property tax is an essential contributor to revenue generation for state governments. However, there are states with lower property taxes than others.