Property taxes are a crucial aspect of homeownership in the U.S., impacting everything from monthly mortgage payments to long-term financial planning.
A new study from Maptive has revealed which states are imposing the highest and lowest property taxes in 2024.
What Is Property Tax?
Property tax is a levy imposed on real estate by local governments, primarily used to fund public services such as schools, roads, and emergency services.
This tax is based on the assessed value of a property, which is typically determined by local tax assessors. The assessment process involves estimating the property’s market value, often using methods like comparing recent sales of similar properties, calculating replacement costs minus depreciation, or evaluating the property’s income-generating potential. Once the property’s assessed value is established, the local government applies a tax rate, known as the millage rate, to determine the amount of tax owed.
The millage rate is expressed as a rate per $1,000 of assessed value. For example, a millage rate of 20 means that $20 is levied for every $1,000 of the property’s assessed value. Property taxes are often collected by multiple entities, such as counties, cities, and school districts, each setting its own tax rate.
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Top 5 States with the Highest Property Taxes
- New Jersey: With an average effective property tax rate of 2.47 percent, New Jersey tops the list of states with the highest property taxes. Homeowners in this state pay an average of $8,928 annually on a median-priced home.
- Illinois: Illinois follows closely with a property tax rate of 2.29 percent, resulting in an average annual tax of $5,213 on a median-priced home.
- Connecticut: The effective property tax rate in Connecticut stands at 2.16 percent, leading to an average annual tax of $6,251 on a typical home.
- New Hampshire: This state has an effective property tax rate of 2.09 percent, with homeowners paying around $6,235 annually on a median-priced home.
- Texas: In Texas, the property tax rate is 1.90 percent, translating to an average annual tax of $4,399 on a median-priced home.
Top 5 States with the Lowest Property Taxes
- Hawaii: Hawaii boasts the lowest property tax rate in the country at 0.29 percent. Homeowners here pay an average of $1,915 annually on a median-priced home.
- Alabama: With a property tax rate of 0.43 percent, Alabama residents pay approximately $742 in annual property taxes on a median-priced home.
- Colorado: Colorado has a property tax rate of 0.52 percent, resulting in an average annual tax of $2,125 on a median-priced home.
- Nevada: In Nevada, the effective property tax rate is 0.55 percent, with homeowners paying about $1,793 annually on a median-priced home.
- Utah: Utah rounds out the list with a property tax rate of 0.57 percent, leading to an average annual tax of $1,972 on a typical home.
Rising Property Tax Rates
In recent years, property tax rates have been on the rise across the U.S., driven by increasing home values and changing local government needs. The year 2024 has seen significant changes in property taxes, with states implementing various measures to either alleviate or increase the tax burden on homeowners.
Nationally, the average property tax bill for single-family homes has increased by 4.1 percent in 2023, driven largely by rising home values.
From 2019 to 2023, the median property tax bill for single-family homes in the U.S. increased by around 24 percent. This trend has particularly affected new homeowners, many of whom are surprised by higher-than-expected property tax bills.
As property values continue to rise, and with them property tax assessments, the financial burden on homeowners could grow, making it more important than ever to understand the property tax landscape.
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