Top 5 Best and Worst Property Tax States Under New Federal Rules

Property tax rates

When it comes to the average cost of living, all U.S. states are definitely not created equal. And it’s not just the obvious things, like buying a new home or how much date-night for two usually costs. Plus, the recent tax reform law impacted property taxes at the individual county level as well as across different states. This year, homeowners in politically blue counties will pay nearly 2x more in property taxes compared to politically red counties. That cost difference is no joke — and it could play a big role in choosing where to purchase your home.

Average U.S. Property Tax Rates Rose Sharply in 2017

ATTOM Data Solutions conducted a 2017 property tax analysis for more than 86 million U.S. single family homes. Their report shows tax revenue collected on single-family homes totaled $293.4 billion. This averages out to $3,399 per home and an effective 1.17% rate — a 3% increase compared to 2016. But because property tax rates on single-family homes varied widely at the county level, they rose 6% overall in 2017.

With that in mind, let’s review the highest and lowest average property taxes by state. That way, you can buy your retirement home or relocate based on what your budget can best afford.

Five States Where You’ll Pay the Most Property Taxes

First, we’ll review the five U.S. states with the highest effective property tax rates. These tend to be clustered in the Northeast and Midwest, with Texas as the lone exception:

  1. New Jersey has the highest average property taxes across the nation. If you live there, plan to pay an effective rate of 2.28% each year. If you have a $250,000 home, that works out to an annual tax bill of $5,700, on average. Residents in Westchester County, the luxurious New York City suburb, pay $17,179 in property taxes, on average. That’s the highest in the nation, and the IRS capped deductions for homeowners at $10,000!
  2. Illinois has an average 2.22% effective property tax rate, but if you live in Rockford, you’ll pay 3.03% instead.
  3. Vermont has an average 2.19% property tax rate on single-family homes this year. According to U.S. Census data, about 72% of Vermont’s residents are homeowners; the 2018 median home listing price is $251,633.
  4. Texas saw its average property tax rate jump from 2.06% to 2.15% this year, thanks to new federal rules. But El Paso homeowners pay much more in property taxes than others across the state: 2.63% annually, on average.
  5. New Hampshire enjoys an effective property tax rate of 2.06%. With an average home price listed at $283,233 in 2018, you’ll pay about $5,834.59 in annual property taxes.

Five Lowest Property Tax States for Homeowners

Now, let’s look at the five states with the lowest effective property tax rates this year. Surprisingly, Hawaii tops this list — kind of makes you want to move there right now, doesn’t it?

  1. Hawaii has the lowest effective property tax rate in the United States at just 0.34% (.33% for Honolulu). Despite this low rate, the 2018 average home listing priced at $608,000 likely gives many would-be Hawaiians pause.
  2. Alabama offers the second-lowest property tax rate at just 0.49%, on average. Looking for a better bargain before you move? Try cities like Montgomery (.36%) or Tuscaloosa (.41%). With the state’s median home prices set at $191,256, you’ll pay just $937 in property taxes.
  3. Colorado clocks in with the third-lowest property tax rate in the nation at just 0.51%. But house-hunters looking to relocate here should check out Colorado Springs (.42%) or Greeley (.45%) for even bigger bargains.
  4. Tennessee is next on our list at just 0.56%. With median home prices set at $226,933 in 2018, your average property tax bill should cost around $1,270.82 annually.
  5. West Virginia finishes out the bottom five with a 0.57% effective property tax rate. This state also boasts the lowest average listing price ($149,550 in 2018) and highest home ownership rate (almost 76%) nationwide.

Is Florida Still A Property Tax Bargain for Retirees?

Curious about Florida, that popular retiree haven? Like most states, each county levies a slightly different property tax rate. Overall, it’s in the middle of the pack at 0.97% — unless you live in Miami-Dade County. There, you’ll pay about $2,756 each year in property taxes (about 1.02% of the median home’s value). The median property tax bill in the Sunshine State is $1,773.

Because housing is a major expense in most retirees’ budgets, lower property taxes can improve your quality of life. It’s possible to live out your later years relaxing near a beach somewhere, if that’s your goal. Just remember: Every county with beachfront property won’t charge you the same property tax rate… even in Florida!

Leslie Sullivan
Exclusively covering all finance-related topics, including investing, saving money, estate planning, insurance, lowering your tax burden and everything you need to know about planning a comfortable retirement.
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