How Much Property Tax Rates Actually Vary
Effective property tax rates (annual tax as a percentage of home value) range from under 0.3% in Hawaii to over 2.0% in New Jersey, Illinois, and Texas. This 6–7x spread across states is enormous — and the dollar impact on affordability is substantial.
| State | Approx. Effective Rate | Annual Tax on $350k Home | Category |
|---|---|---|---|
| Hawaii | 0.28% | ~$980 | Very Low |
| Alabama | 0.37% | ~$1,295 | Very Low |
| Louisiana | 0.50% | ~$1,750 | Low |
| Tennessee | 0.56% | ~$1,960 | Low |
| South Carolina | 0.55% | ~$1,925 | Low |
| Nevada | 0.50% | ~$1,750 | Low |
| Arizona | 0.60% | ~$2,100 | Moderate |
| Florida | 0.83% | ~$2,905 | Moderate |
| Colorado | 0.50% | ~$1,750 | Low |
| Georgia | 0.80% | ~$2,800 | Moderate |
| North Carolina | 0.78% | ~$2,730 | Moderate |
| Virginia | 0.80% | ~$2,800 | Moderate |
| Pennsylvania | 1.36% | ~$4,760 | High |
| Ohio | 1.41% | ~$4,935 | High |
| Michigan | 1.32% | ~$4,620 | High |
| Texas | 1.65% | ~$5,775 | High |
| Illinois | 1.95% | ~$6,825 | Very High |
| New Jersey | 2.16% | ~$7,560 | Very High |
Figures are approximate state averages. Local rates vary within states. Verify with your county assessor. Source: State tax data, Tax Foundation research.
The No-Income-Tax Tradeoff
Several states that attract relocators with "no income tax" marketing have substantially higher property taxes as a result. Texas is the most prominent example: no state income tax, but effective property tax rates averaging 1.6–1.7%, among the highest in the nation.
For a renter, the income tax advantage is straightforward. For a homeowner, you need to calculate both the income tax benefit and the property tax cost. On a $400,000 home in Texas, property taxes run approximately $6,400–$6,800 per year — more than the income tax many moderate earners would pay in most high-tax states.
Exemptions and Assessment Caps
Most states offer property tax exemptions that reduce the effective burden for certain owners:
- Homestead exemptions: Available in most states; reduce the taxable value of your primary residence, sometimes by a fixed dollar amount ($25,000–$50,000) or a percentage.
- Senior exemptions: Many states offer reduced rates or frozen assessments for homeowners over 65.
- Assessment caps: California's Proposition 13 limits annual assessment increases to 2% while you own the property. Texas caps annual increases at 10%. These caps can make long-term ownership much cheaper than the nominal rate suggests — but they also make the property more expensive for new buyers, who reset to current market value.
- First-time buyer exemptions: Some states and counties offer temporary reductions for first-time buyers.
Always check the specific exemptions available in your target county before estimating your actual tax bill. The assessed value (what taxes are applied to) is often different from the market value.
What To Do Before Buying
- Look up the specific property's current tax bill on your county assessor's website or ask your real estate agent. The current tax bill tells you what the prior owner paid — which may be much lower than what you'll pay if they've owned it for years under a cap.
- Ask what the assessed value will be after sale. In most states, a sale triggers reassessment to current market value, which can significantly increase the tax bill from what the seller pays.
- Look up available exemptions at your county assessor's office. If you're eligible for a homestead exemption, calculate the tax after the exemption applies.
- Compare total housing cost — mortgage (principal + interest) + property tax + insurance + HOA — not just the purchase price.