Property taxes are a key source of income for city, county, and state governments, which use the money to fund projects such as schools, road construction and maintenance, parks and recreation programs, public transportation, and payroll for municipal employees—including police, firefighters, and your local public works department.

Depending on where you live, you may pay a modest amount in property taxes or your tax bill could rival your mortgage. Across the U.S., the mean effective property tax rate—total real estate taxes paid/total home value—was 1.13% in 2016, according to data from the Tax Foundation, a tax policy research organization. Hawaii had the lowest rate in the country, at just 0.29%. New Jersey had the distinction of having the highest rate, coming in at 2.16%.

Key Takeaways

  • Property taxes are levied by states annually based on the assessed value of land and structures that you own.
  • If you like to live on lots of land and in a big house, you may want to consider moving to a state with lower property tax rates to make it easier on your wallet.
  • Hawaii has the lowest effective property tax rate in the union (0.29%), while New Jersey has the highest (2.16%).
  • Several other states have property tax rates under 1%, many of which are located in the American South.
  • Some states offer individual credits and exemptions to qualified homeowners, which can further reduce your effective property tax rate.

10 Best States for Property Taxes

If you're curious about how low property taxes can get, check the list of the 10 best states for property taxes, below. Also listed are each state's effective property tax rate, median home value, annual taxes on a home priced at the state median value, and median household income—to help put the tax rates in context.

To determine the states with the lowest property taxes, Investopedia reviewed the mean effective property tax rate—the total real taxes paid/total home value—of owner-occupied housing in all 50 states, from the Tax Foundation (the figures exclude property taxes paid by businesses and renters).

Median home values—current for Feb. 2019—are from real estate aggregator Zillow's Home Value Index (ZHVI), a smoothed, seasonally adjusted measure of the median estimated home value for single-family homes (including condos and co-ops) across the U.S. We looked at data from the U.S. Census Bureau's 2013–2017 American Community Survey to find median household incomes. 

1. Hawaii

  • Effective property tax rate: 0.29%
  • Median home value: $620,400
  • Annual taxes on home priced at state median value: $1,799
  • Median household income: $74,923

Hawaii has the lowest effective property tax rate in the country. Of course, it also has the highest median home value, which means homeowners here may still be on the hook for a hefty tax bill.

2. Alabama

  • Effective property tax rate: 0.40%
  • Median home value: $130,500
  • Annual taxes on home priced at state median value: $522
  • Median household income: $46,472

Alabama has both a low tax rate and home prices that are well below the median home value in the U.S. ($225,300 as of Feb. 2019), making it one of the most affordable states to be a homeowner.

3. Louisiana

  • Effective property tax rate: 0.51%
  • Median home value: $147,200
  • Annual taxes on home priced at state median value: $751
  • Median household income: $46,710

Louisiana is another state on our list with both a low effective property tax rate and median home values that are well below the national average. Gas here is taxed at 20 cents per gallon—one of the lowest rates in the country.

4. West Virginia

  • Effective property tax rate: 0.53%
  • Median home value: $97,600
  • Annual taxes on home priced at state median value: $517
  • Median household income: $44,061

West Virginia's low effective property tax rate and modest home prices make for one of the lowest housing costs in the country. 

5. Wyoming

  • Effective property tax rate: 0.55%
  • Median home value: $226,300
  • Annual taxes on home priced at state median value: $1,245
  • Median household income: $60,938

Wyoming's median home values aren't as low as some other states on our list, but there's no state income tax, and at 4%, the state's sales tax is one of the lowest in the country.

6. South Carolina

  • Effective property tax rate: 0.56%
  • Median home value: $165,100
  • Annual taxes on home priced at state median value: $925
  • Median household income: $48,781

South Carolina and Delaware have the same effective property tax rate of 0.56%, but South Carolina's significantly lower median home values give the state an edge when it comes to cost of living.

7. Delaware

  • Effective property tax rate: 0.56%
  • Median home value: $237,300
  • Annual taxes on home priced at state median value: $1,329
  • Median household income: $63,036

Given that Delaware and South Carolina have the same effective property tax rate, higher median home values in Delaware mean homeowners will likely pay more in property taxes. Still, Delaware has a higher median household income and, as an added bonus, the state has no sales tax.

8. Colorado

  • Effective property tax rate: 0.59%
  • Median home value: $375,500
  • Annual taxes on home priced at state median value: $2,215
  • Median household income: $65,458

The effective property tax rate in Colorado is low, but higher home prices mean homeowners will pay $2,215 on a median-priced home—the highest tax burden (dollar wise) of any state on our list. Of course, Colorado’s median household income is the second highest on our list, which may help that tax bill seem a bit more affordable. 

9. Arkansas

  • Effective property tax rate: 0.63%
  • Median home value: $125,700
  • Annual taxes on home priced at state median value: $792
  • Median household income: $43,813

A low effective property tax rate coupled with low housing costs help make for an attractive cost of living in Arkansas. Gas is taxed at 22 cents per gallon—well below the 2018 national average of 36 cents per gallon—but sales tax is on the high end, with a combined state and average local sales tax rate of 9.41% (the third highest in the country).

10. Mississippi

  • Effective property tax rate: 0.64%
  • Median home value: $127,300
  • Annual taxes on home priced at state median value: $815
  • Median household income: $42,009

Mississippi has the highest effective property tax rate on our list, but it's still well below the mean for the U.S. Gas is taxed at 19 cents a gallon—one of the lowest rates in the nation—and state income tax rates are being gradually reduced for its lowest-earning residents.

The Bottom Line

Depending on where you live, you may qualify for a property tax exemption offered by your state, county, or local jurisdiction. Some states offer a homestead exemption, for example, where you don't pay taxes on a certain portion of your home’s value—say, the first $150,000—if you meet certain age and/or income requirements.

Other types of exemptions may be available that lower taxes for older homeowners, people with disabilities, military veterans, and homeowners who do certain renovations or install renewable energy systems (think: solar panels and geothermal heat pumps). Since these discounts don't automatically show up on your tax bill, it's important to ask the agency that collects your property tax to find out if you’re eligible.