If you are currently looking to buy a house and are adverse to property taxes, one of the best locations to buy property is in the state of Hawaii. The median property tax assessment in Hawaii in 2015 was $1,324. In 2016, the effective property tax rate was 0.28%. This indicates property with a median value of $504,500 can expect to have property taxes of approximately $1,405.

Counties With Highest and Lowest Property Taxes

In 2015, the county with the lowest average property tax assessment was Hawaii County, with an average levy of $682. The highest property tax assessment occurred in Honolulu County, where the average property tax bill was $1,549. Other property tax levies included an average assessment of $1,099 for properties in Kauai County, as well as $965 for properties in Maui County.

How Hawaii Property Taxes Compare to Neighboring States

The two states closest to Hawaii are Alaska and California. Alaska’s effective real estate tax rate for 2016 is 1.21%. This is the 18th-highest rate in the country. Alternatively, California’s effective real estate tax rate for 2016 is 0.81%, which is good for 17th lowest in the United States. Because of the unique nature of Hawaii’s geographical location, it is no surprise that there is little correlation between the property tax rates of these three states.

How Hawaii Property Taxes Compare to National Averages

In 2015, Hawaii’s median property tax was the 17th highest in the United States. The average property tax levy was 1.62% of the average individual income. This percentage was the ninth lowest in the United States. Hawaii’s 2016 effective real estate tax rate of 0.28% is the lowest in the nation.

Why Hawaii’s Property Taxes Are So Low

Certain counties in Hawaii provide exemptions on portions of the property's value. For example, the county of Honolulu has a policy where if you plan on utilizing a piece of property for your residence, you can file a home exemption. Homeowners may reduce the assessed value of the property by $80,000. In fact, individuals who are at least 65 years old may reduce the taxation base of the property by $120,000. Hawaii's property tax collections do not go towards public education systems. Real estate taxes are utilized for public servants, including police, firefighters, lifeguards, parks, refuse services and other emergency services.

Another factor is Hawaii’s cost of living, which is 57% higher than the national average. The state also frequently pays the highest prices for gasoline. These expenses are higher because they are not subsidized by property taxes. Hawaii also does not charge a state vehicle tax. However, the state does pull in taxation revenue from other sources.

Hawaii also charged a hotel tax of 9.25%, as of April 2016. Because Hawaii relies so heavily on tourism, this taxation on visitors creates a large revenue stream. Hawaii also charges a cigarette tax that, as of April 2016, was $3.20 per pack. Finally, Hawaii has implemented a progressive income tax with 12 marginal tax brackets. The top bracket charges the highest earners 11%, which is the second-highest marginal income tax rate in the country. Although the lowest eight brackets are taxed less than 8.25%, anyone making more than $150,000 of taxable income per year will be assessed at a marginal rate that is at least 9%. Therefore, Hawaii has other taxation streams from which to collect revenue besides property taxes.

Are Hawaii's Property Taxes Too Low?

Because property taxes are so favorable for homeowners, Hawaii faces the issue of nonresidents investing in property, as approximately one-quarter of the housing market is owned by individuals not living in Hawaii. This has caused the housing market in Hawaii to experience severe competition, making the properties less affordable for many. Hawaii's legislative officials are currently investigating options to assess higher property tax rates on nonresidents.

Montana Property Tax Guide

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