Which State Has the Lowest Property Taxes?
Homeowners and corporations pay property taxes each year. In some locales, those who own personal property, like boats or cars, also are taxed. While property tax is unavoidable with home or business ownership, those in the American South pay some of the lowest property taxes.
What’s Behind Property Taxes?
Local governments that govern over an area where the property is located are responsible for calculating property taxes. These taxes are based on the value of the property, which may include land. The owners of the property are subject to paying property taxes, which may be deemed a regressive tax.
Property tax is used to improve the local community. Local governments use collected property taxes to pay for enhancements to the water and sewer systems. Police and fire departments, highway and road constructions, educational institutions and libraries are funded by property taxes.
Property taxes vary annually. The current market value of a property is one factor that determines the amount of property tax an owner must pay for a given year. Tax rates are normally recalculated each year by tax officials in municipal governments. A hired tax assessor assesses area properties.
Property owners have the option to either formally contest tax rates or discuss them with the assessor. Unpaid property taxes have financial consequences. Taxing authorities impose a lien against a property when the owners fail to pay their property taxes.
What’s the Average Property Tax?
In the United States, the average amount of property tax American homeowners pay every year for their homes is $2375, according to the US Census Bureau. Twenty-seven states impose vehicle property taxes, and owners are taxed an additional $441 each year.
Depending on the area of residence, drastic variances in property taxes exist. In Arkansas, for instance, property taxes can be as low as $743 per year. On the opposite end of the tax spectrum, property taxes can balloon to $7800 per year for homeowners in New Jersey.
States with a lower property tax make living in a large house with ample amounts of land financially feasible. Many southern states are known to have the lowest property tax rates in the union. The property tax rates in the American South are typically under one percent.
Which States Have the Lowest Property Taxes?
While some states may have a low property tax rate, these regions may also have a high median home value. Homeowners who live in homes worth over half a million dollars unavoidably remain stuck with a heavy property tax bill each year.
Hawaii, for instance, has an effective property tax rate of 0.29 percent. The property tax rate in The Aloha State is the lowest in the country. However, the median home value on the island is $620,400. These homeowners remain on the hook for paying $1799 in property taxes each year.
Competing for the lowest tax rate is Alabama, which has a 0.40 percent property tax rate. In contrast to home prices in Hawaii, the median price of homes in Alabama is $130,500. Homeowners pay a $522 property tax bill, making this state the most affordable to own a home.
Louisiana comes a close third in property tax rates with 0.51 percent. Median home prices are among the lowest in the nation. Given the state’s combination of low property tax rates and median home values, Pelican State homeowners pay a modest $751 in property taxes annually.
4. Lowest Business Property Taxes: New Mexico, Indiana, Utah
Business properties differ when it comes to the lowest states for property taxes. The Tax Foundation’s research concludes that New Mexico, Indiana and Utah are among the states that have the lowest tax rates for business properties. New Jersey has the highest property taxes for businesses.
What are Possible Exemptions?
Some states, counties or local jurisdictions offer property tax exemptions to people who qualify. Homestead exemptions (where owners do not pay taxes on a portion of the home’s value) reduce the cost of property taxes for those who meet age or income requirements.
Exemptions may be offered to eligible homeowners, such as older people, military veterans and those with disabilities. Homeowners who invest in certain renovations, like solar panels, are eligible for discounts and should ask their taxing authority for a reduction of their tax bill.
Some business properties may be eligible for a property tax exemption, as well. Such businesses may include nonprofits, those situated on historical land and agricultural properties. In New York, for example, businesses may also receive exemptions for temporary greenhouses and forest land.
Depending on where a property is located, a property tax bill can almost equal a mortgage. When either your property tax or business property tax bill is overburdensome, you may want to consider moving to a state with low property tax rates.
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