Property taxes by state
Quick insights
- Every state, county and municipality may have a different property tax rate, and your property taxes are based on the assessed value of your home.
- It’s a good idea to consider other types of taxes, such as employment and sales taxes, in addition to property taxes when deciding where to live.
- For questions about your specific tax situation, consider consulting a tax advisor.
When you buy a home, you become part of a community. That means you’ll need to pay property taxes to your state or local governments. This money is used to fund schools, emergency services, sanitation and much more.
The amount you’ll be required to pay is greatly influenced by the state, county, city and community where you live. If you’re looking to become a homeowner, but aren’t sure where to buy, knowing different states’ effective property tax rates could help you narrow down the list.
Why do property taxes vary by state?
Not only does every state have a specific property tax rate, but each county and municipality within the state may have a different rate. First, each state charges a base tax rate. While the state rate will be the same across the board, different towns and counties will charge different property tax rates based on the needs and priorities of the community.
When you buy a home, your property taxes will be based on three key factors:
- Your home’s assessed value: This is the value of your property as determined by your city, state or county tax assessor. This may differ from the fair market value of your home as determined by an appraiser.
- Your state and local property tax rate: This combined annual rate is based on a percentage of your home’s assessed value. Your local property tax rate may be expressed as a ‘mill rate’ (tax per $1,000 of assessed value), depending on your area. Each county, town or municipality may set its own mill rate.
- Exemptions: These may lower the amount you pay in property taxes or negate them altogether. They’re typically based on whether a house is your primary residence, second home or an investment property as well as your age, military service, income and first-time homebuyer status.
In theory, you could buy a home on one side of the county line and have a neighbor on the other with a similarly priced home. Even though your homes have the same value, you and your neighbor may have different property tax payments based on the differences in mill rates and the exemptions you qualify for.
How are property taxes paid?
While you can pay your property taxes annually, many homeowners choose to make a monthly payment into an escrow account. Set up by a lender or mortgage servicing company, the escrow service takes responsibility for paying your property taxes, typically annually or every six months.
Which state has no property tax?
While some states have 0% sales tax or no income taxes, every state in the U.S. charges some sort of property tax.
What is the most tax-friendly state to live in?
Being tax-friendly and having low property taxes don’t always mean the same thing. While property taxes can account for a percentage of a homeowner's annual expenses, there are other considerations, such as your state’s income tax and state and local sales taxes.
In summary
In some communities, higher property taxes may be associated with higher local spending on public services, but outcomes and priorities vary. Consider your full budget and priorities.
Ready to become a homeowner? Get started on a mortgage application today. Our Home Lending Advisors can help you navigate the homebuying process so you can buy the right home for you.
