Which States Do Not Have Property Taxes in 2021

By: ROS Team September 11, 2021

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You have to consider many things once you decide to invest in real estate, the first of which is where to invest in rental property. From an investment perspective, you should look for locations that can generate positive rental income flow, job opportunities and have the potential to appreciate over time.

These factors are likely to influence your return on investment. In addition, you should be mindful of real estate property taxes because they also play a role in your investment’s success. In this blog, we have compiled a list of states without property taxes and states with no property taxes after age 65.

What Is a Real Estate Property Tax?

Real estate property taxes are levied on an immovable or permanent structure and the land on which it sits. When you purchase real estate for investment purposes, you pay property taxes directly to local taxing entities.

Real Estate Property Tax

Real estate property taxes differ across states, so it’s a good idea to become familiar with the tax structure where you live or own real estate. You can simply calculate the property tax by multiplying the property tax rate by the property’s value.

Which States Do Not Have Property Tax in 2021?

Unfortunately, there are no states without a property tax. Property taxes remain a significant contributor to overall state income. Tax funds are used to operate and maintain essential government services like law enforcement, infrastructure, education, transportation, parks, water and sewer service improvements.

States without property tax refer to those states that have the lowest ratio rate of property tax. In other words, the tax is so small that it’s almost negligible and doesn’t affect the investment return much.

The Top 10 States With the Lowest Property Tax Based on State Median Home Value Are:

1- Hawaii

Property Tax Rate: 0.35%

Hawaii has the lowest effective property tax rate among all states. Here, residents only pay 0.35% of their home value. On the other hand, Hawaii also has the highest median home values in the USA. The current rate is likely to stay there for 2021.

2- Alabama

Property Tax Rate: 0.40%

Another state among the most affordable states for homeowners is Alabama. It has the second-lowest property tax rate among all states.

3- Louisiana

Property Tax Rate: 0.52%

Louisiana has the third lowest property tax rate. The median home value in Louisiana is well below the national average which stands at just $178,000.

4- Wyoming

Property Tax Rate: 0.55%

The average home price is not the lowest in Wyoming compared to other states, which are $257,300. But with the fourth-lowest property tax rate and no state income tax makes it an ideal place to live in.

5- West Virginia

Property Tax Rate: 0.55%

Low median home prices coupled with a Property Tax Rate of 0.55%, West Virginia is one of the most affordable places to live in the U.S.

6- South Carolina

Property Tax Rate: 0.56%

With a property tax rate of 0.56%, South Carolina has a higher property tax rate than both Colorado and Delaware, but their median home values are much lower, at $204,800. It all means that residents won’t have to pay as much in property taxes.

7- Colorado

Property Tax Rate: 0.56%

0.56% of Property Tax Rate enlist Colorado among the lowest tax rate states, but higher average median home prices in Colorado makes it one of the highest tax burden states on our list.

In 2020, Colorado repealed a provision of their state constitution. It is known by the name of the Gallagher Amendment, which put a limit on property taxes. This meant that the residential property must equal 45% of the total share of state property taxes. It can only be changed by statewide vote. If Colorado votes against the amendment, it will increase property taxes for residents. It has been said that the funds garnered from rising tax rates will go into funding libraries, schools, and public service workers in the state.

8- Delaware

Property Tax Rate: 0.58%

In Delaware, the Property Tax Rate is slightly higher than in Colorado. But the good thing is that lower median home prices of $274,067. In addition to it, there is no sales tax in the state.

9- Utah

Property Tax Rate: 0.62%

Utah comes at the 9th position among the lowest tax rate states, but the average median home price is higher than the national average. In addition to it, it is one of the 23 states with no personal property tax on vehicles.

10- Arkansas

Property Tax Rate: 0.64%

Low property tax rates and low housing costs make Arkansas one of the most affordable states in the U.S.

11- Nevada

Property Tax Rate: 0.69%

Nevada has the 11th lowest property tax rate in the U.S. An average single family home price in Nevada is $320,200 in Nevada.

States with No Personal Property Tax on Vehicles

Well, now we know that there are no states with no property tax, but there are many states where there is no personal property tax on vehicles.

Here is a list of them:

  •     New Mexico
  •     New York
  •     Tennessee
  •     District of Columbia
  •     Idaho
  •     North Dakota
  •     Washington
  •     South Dakota
  •     Pennsylvania
  •     New Jersey
  •     Wisconsin
  •     Texas
  •     Vermont
  •     Illinois
  •     Maryland
  •     Alaska
  •     Oregon
  •     Oklahoma
  •     Delaware
  •     Georgia
  •     Florida
  •     Hawaii
  •     Ohio
  •     Utah

States with Highest Property Taxes

Among All 50 States, the Following States have the Highest Property Taxes:

  •    New Jersey

Median Annual Property Tax: $7,840
Property Tax Rate: 2.44%

  •    Illinois

Median Annual Property Tax: $4,157
Property Tax Rate: 2.31%

  •    New Hampshire

Median Annual Property Tax: $5,388
Property Tax Rate: 2.20%

  •    Connecticut

Median Annual Property Tax: $5,582
Property Tax Rate: 2.07%

  •    Wisconsin

Median Annual Property Tax: $3,286
Property Tax Rate: 1.94%

  •    Vermont

Median Annual Property Tax: $4,040
Property Tax Rate: 1.83%

  •    Texas

Median Annual Property Tax: $2,775
Property Tax Rate: 1.83%

  •    Nebraska

Median Annual Property Tax: $2,565
Property Tax Rate: 1.80%

  •    New York

Median Annual Property Tax: $4,915
Property Tax Rate: 1.68%

  •    Rhode Island

Median Annual Property Tax: $4,013
Property Tax Rate: 1.66%

  •    Michigan

Median Annual Property Tax: $2,241
Property Tax Rate: 1.64%

States with the Lowest Median Annual Property Tax

The property taxes an average American homeowner spends on the home every year are around $2,200. There is a personal property tax on vehicles in nearly 27 states. Almost in every state, there is one or the other types of property tax. Almost ten states have the lowest property tax ratio and 23 with no personal property tax on vehicles. The states with lower property taxes might have higher taxes on things like income, sales, gas, etc.

Even though you own or rent a home, you will pay property taxes in one way or another. But the fact remains that the property tax burden will vary significantly among different states.

Here is a list of states with the lowest annual property taxes. It is based on the median home value for single family homes across all states.

1) Alabama

Median Annual Property Tax: $558

2) West Virginia

Median Annual Property Tax: $653

3) Arkansas

Median Annual Property Tax: $743

4) Louisiana

Median Annual Property Tax: $795

5) South Carolina

Median Annual Property Tax: $851

6) Mississippi

Median Annual Property Tax: $879

7) Tennessee

Median Annual Property Tax: $1,120

8) Kentucky

Median Annual Property Tax: $1,120

9) Oklahoma

Median Annual Property Tax: $1,129

10) Indiana

Median Annual Property Tax: $1,130

What States Have No Property Tax for Senior Citizens?

When it comes to property taxes, it’s nearly impossible to avoid paying some form of property taxes. It becomes more evident if you own a piece of real estate. Having said it, some states are more friendly than others regarding local property taxes to senior citizens. The most standard qualifying criteria for senior citizens is age 65 or older, with a few exceptions. If you live a married life and own a jointly owned residence, then only one spouse has to be 65 years or older.

No Property Tax for Senior Citizens

Some states waive property taxes for property owners who are age 65 and over. These States have No Property Tax for Seniors:

  • South Dakota

Among states with the least property tax from seniors, South Dakota is the most generous. To get tax exemption, seniors in South Dakota have to apply for state property tax relief programs. Citizens older than 70 years may also get a homestead exemption, which allows them to postpone paying property tax until the home is sold.

  • Florida

Seniors in Florida are eligible for significant property tax reductions and, under certain circumstances, they may get a 100% tax exemption.

  • New York

Citizens age 65 and above can receive a 50% tax exemption if their annual income is less than $29,000.

  • Alabama

Seniors over the age of 65 are eligible for a property tax exemption.

  • South Carolina

Citizens over age 65 and non-military citizens can get a homestead exemption.

  • Georgia

Seniors in Georgia can apply for a property tax deferral or tax exemption.

  • Hawaii

Seniors of age 65 and above can claim tax exemption at a maximum home value of $120,000, and the number is likely to increase in the future.

  • Alaska

Being a homeowner in Alaska and over the age of 65, you are likely to get a property tax exemption on the first $150,000 of your home’s value. Like, on a home of $250,000 in Alaska, you will only pay tax on $100,000 as 250,000 minus $150,000 equals $100,000.

  • Mississippi

Mississippi is among the10 lowest in the nation when it comes to taxing senior citizens. Anyone over the age of 65 can claim a tax exemption on the first $75,000 of the home’s value.

  • Texas

In Texas, most seniors over the age of 65 don’t have to pay property taxes as there is an exemption on the first $160,000 of the home value.

How Do Property Taxes Affect Rental Income Flow?

Some might wonder why they need to look for states that do not have property tax for investing in real estate. Well, you should understand that there are many expenses associated with owning a property. Rental fees may vary depending on factors such as the cost of renovations and/or repairs. There are also other expenses like mortgage payments and the real estate property tax for which a property owner is responsible. All these expenses can have a considerable impact on rental income flow.

Property Taxes Affect Rental Income Flow

Every investor wants to maximize their properties’ potential cash flows such that they generate rental income that covers all these expenses and leave something extra as profit. So, if you end up purchasing property in tax-burden states, you may ultimately be decreasing your cash flow potential.  You can potentially save more money by investing in real estate located in tax-friendly states.

Ways to Minimize Your Property Tax Burden

There is no way to avoid paying property taxes.  However, there are a few things that you can do to keep the assessed value of their property low, which will result in lower property taxes. These include:

  • Confirming that the information listed on your annual tax assessments is correct.
  • Try to avoid making home improvements that include significant structural changes like converting an attic into a bedroom. You should only consider such differences if the change will help generate additional rental income.
  • Nicer-looking homes are more likely to get assessed a higher tax.
  • Find out the property taxes for neighboring houses similar in size and features to yours and compare the assessed market value.
  • Invite the local tax assessor to your house to conduct a walk-through of your home. Highlight things that may help reduce the perceived property value,  such as popcorn ceilings, outdated appliances, or older windows and doors. Otherwise, an assessor will likely only look for things that add value to your house.

Final Thoughts

It’s worth reiterating that there is no such thing as property tax-free states. Only states which have low property tax rates are referred to as tax-free.  One thing to know for sure is that if you invest in real estate property in any of these states, you will be able to save thousands of dollars every year. Try to find higher rental income potential in states with low property taxes to maximize your real estate investment return.