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.
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 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.
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:
Property Tax Rate: 0.27%
According to a study by the Tax Foundation, Hawaii has the lowest average effective property tax rate at 0.27%. This is significantly lower than the national average of 1.19%.
The state also has relatively low property values, with the median home value being $551,800 compared to the national median home value of $184,700.
This combination of low property taxes and values may make Hawaii an attractive option for prospective homeowners.
Property Tax Rate: 0.40%
The state of Alabama has some of the lowest property taxes in the United States, with an average effective rate of 0.40%. Some counties in Alabama even have a property tax rate of 0%, meaning residents do not have to pay any property taxes at all.
This low property tax rate can be attributed to the state’s reliance on sales and income taxes to generate revenue, as well as its relatively low cost of living.
Property Tax Rate: 0.55%
In comparison to other states, Louisiana has a relatively low property tax rate. The median real estate taxes paid in the state are $926, and the median home value for owner-occupied homes is $168,100, resulting in an effective property tax rate of 0.55%.
Property Tax Rate: 0.58%
The average home price is not the lowest in Wyoming compared to other states, which are $257,300. But the fourth-lowest property tax rate and no state income tax make it an ideal place to live in.
Property Tax Rate: 0.55%
With 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.
Property Tax Rate: 0.56%
Based on the median real estate taxes paid, South Carolina would likely fall into the category of U.S states with the lowest property tax. This is because its effective property tax rate of 0.566% is lower than the national average of 1.19%. Additionally, its median home value is also lower than the national average of $193,500.
Property Tax Rate: 0.52%
In Colorado, the average property tax rate is 0.52%, making it one of the states with the lowest property taxes in the country. This low rate can be attributed to Colorado’s strict taxation laws, which limit the amount of revenue that local governments can collect from property taxes.
However, this also means that funding for public services and infrastructure may be limited in some areas of the state.
Property Tax Rate: 0.57%
Delaware is also known for its low corporate taxes, making it a popular location for businesses to incorporate. The state’s beaches and coastal towns attract tourists and vacationers, while Wilmington serves as a hub for the chemical and financial industries.
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.
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.
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.
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:
If you live in one of these states and purchase a vehicle out-of-state, you may still be required to pay the personal property tax in your home state.
If you’re considering purchasing a vehicle in one of the aforementioned states without personal property tax on vehicles, it’s important to keep in mind that sales tax will likely apply. The amount of sales tax varies by state.
For example, as of 2016, Alabama has a 4 percent sales tax, while Colorado has a 2.9 percent sales tax.
When it comes to vehicles, personal property taxes and sales taxes are the two most common types of taxes levied by states. If you’re interested in purchasing a vehicle in a state without personal property tax on vehicles, be sure to research the state’s sales tax rate before making your purchase.
Among All 50 States, the Following States have the Highest Property Taxes:
While the average effective property tax rate in the United States is 1.08%, there are several states that have much higher rates. In fact, the top 10 states with the highest effective property tax rates are all above 2%.
New Jersey has the highest effective property tax rate in the country at 2.47%. This is followed by Illinois (2.30%), Connecticut (2.23%), New Hampshire (2.17%), and Wisconsin (2.13%).
While property taxes are generally higher in states with higher home values, this is not always the case. For example, while Texas has a relatively high median home value of $174,600, its effective property tax rate is just 1.93%.
On the other hand, some states with lower median home values have much higher property tax rates. For example, Pennsylvania has a median home value of just $153,900 but an effective property tax rate of 1.89%.
Just because a state has a high property tax rate does not mean that its residents pay more in taxes overall. This is because states with higher property taxes often have lower income taxes. For example, New Jersey has the highest effective property tax rate in the country but also has the third-lowest effective income tax rate.
While some people may view high property taxes as a burden, they can also be seen as a sign of strong public service. States with high property taxes often have good schools, low crime rates, and well-maintained infrastructure.
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.
The following states have the Median Annual Property Taxes:
1) Alabama – $558
2) West Virginia – $653
3) Arkansas – $743
4) Louisiana – $795
5) South Carolina – $851
6) Mississippi – $879
7) Tennessee – $1120
8) Kentucky – $1120
9) Oklahoma – $1129
10) Indiana – $1130
There are a few states that don’t have property taxes for seniors. These include Florida, Texas, and Arizona. There are also a few other states with no property tax after age 65, such as Colorado, Pennsylvania, and New Jersey. If you’re a senior citizen looking to move to a state with no property tax, these are a few of your best options.
These States have No Property Tax for Seniors:
Citizens age 65 and above can receive a 50% tax exemption if their annual income is less than $29,000.
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.
Seniors over the age of 65 are eligible for a property tax exemption.
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.
Seniors in Florida are eligible for significant property tax reductions and, under certain circumstances, they may get a 100% tax exemption.
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.
Citizens over age 65 and non-military citizens can get a homestead exemption.
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.
Seniors in Georgia can apply for a property tax deferral or tax exemption.
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.
There are a few states in the US that do not have an income tax. These states are:
There are also a couple of states that have no state tax on general income, but they do tax specific types of income like interest or dividends. These states are:
So if you’re looking to move to a state with no income tax, you have a few options!
There are many different tax exemptions and programs available to disabled veterans, but one of the most important is the property tax exemption. This exemption can help disabled veterans save thousands of dollars each year on their property taxes.
Currently, there are 21 states that offer some form of property tax exemption for disabled veterans. These states are:
If you are a disabled veteran living in one of these states, be sure to check with your local county or city assessor to see if you qualify for the exemption.
Property taxes are typically calculated by multiplying the assessed value of the property by the tax rate. The assessor’s office determines the assessed value, which is typically a percentage of the property’s market value. The tax rate is set by local government bodies, such as a city or county council.
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.
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.
There is no way to avoid paying property taxes. However, there are a few things that you can do in order to minimize your property tax burden. These include:
Appeal Your Assessment: If you believe that your property has been assessed at a higher value than it should be, you can appeal the assessment. This could result in a lower property tax bill.
Look For Exemptions And Deductions: There are often exemptions and deductions available for certain types of properties or ownerships. For example, veterans and seniors may be eligible for property tax breaks.
Pay Your Taxes On Time: Property taxes are typically due once per year. If you pay them late, you may be subject to penalties and interest charges.
Stay Up To Date On Changes In The Law: Property tax laws are constantly changing. Keeping up with the latest changes can help you minimize your property tax burden.
The lowest property tax state is Hawaii, with an average effective property tax rate of 0.27%.
In the United States, you stop paying property taxes when you reach the age of 65 and are eligible for certain exemptions.
The highest property tax state is New Jersey, with an average effective rate of 2.47%.
In the United States, certain entities, such as government agencies, educational institutions, and nonprofit organizations, are exempt from paying property taxes. Individuals who are considered low-income or have disabilities may also be exempt.
Alaska is the most tax-friendly state in the US. It has no sales tax and low-income taxes. Additionally, Alaska has a refundable “food tax credit” for residents.
South Dakota, Tennessee, and Wyoming are the most tax-friendly states for retirees. These states do not have state income taxes and also do not tax Social Security benefits. However, it is important to note that property and sales taxes may vary significantly between states.
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.