As the cost of housing continues to rise alongside interest rates, with the median U.S. home price up 1.8% year-over-year, many homeowners have chosen to stay put. After a “historically low” moving rate in 2021, data from the National Association of Realtors found that Americans moved even less in 2022. Higher inflation, stubbornly elevated home prices, and no end in sight yet for rate hikes have more and more Americans opting to deal with the state they know, rather than the one they don't.
In many cases, tax rates are a major factor when homeowners decide whether to move across state lines or not. So today, we're going to look at one of the most pressing tax bills that homeowners face, and that's property taxes.
Plus, we'll identify the lowest property tax rates in the country by state, should you be one of those Americans still interested in making a move.
Why States Have Different Property Taxes
Before we get into the list of states with the lowest property taxes, it's important to understand why these rates differ in the first place.
If you read our past article on the five states with the highest property taxes, you'll know that property taxes can range widely from one locality to another. This comes down to the needs of the community, based on their geographic location and various other factors.
Property taxes are then calculated based on the assessed value of the home, rather than on the purchase price. The local tax may be expressed either as a percentage rate or in mills (1 mill would equal $1 in property taxes for every $1,000 of assessed value). Depending upon the municipality, home values and property tax rates may be reassessed at varying intervals.
Across the country, though, property tax bills continue to rise. As of the first quarter of 2023, the average property tax rose by 3.5%, according to the U.S. Census Bureau. If you're in a state with high property taxes, this can certainly make a sizeable impact on your annual budget.
That's why today, we'll look at the top five states with the lowest property tax rates - plus, some notes to take into consideration alongside these numbers.
5 States With The Lowest Property Taxes
To create the list of the lowest property taxes in the country by state, the most recent rates were taken from Tax-Rates.org. To calculate the annual property taxes below, we then pulled data on average home values from each state using information from Zillow.
| Ranking | State | Property Tax Rate | Average Home Value | Annual Property Taxes |
| 1 | Louisiana | 0.18% | $200,028 | $360 |
| 2 | Hawaii | 0.26% | $836,677 | $2,175 |
| 3 | Alabama | 0.33% | $222,005 | $732 |
| 4 | Delaware | 0.43% | $369,846 | $1,590 |
| 5 | West Virginia | 0.49% | $155,148 | $760 |
As you can see, the ultimate property tax bill varies quite considerably based on the location. While Louisiana has the lowest property tax rate and payment of any state, West Virginia actually has the third lowest property tax payment, despite only the fifth lowest rate.
Meanwhile, an honorable mention goes out to Washington, D.C. - which is not a state, but with its 0.46% tax rate and average home value of $619,119, provides another excellent example about the wide disparity in tax bill based on location (annual property tax: $2,848).
What To Consider Before Moving
Based on this information, it's possible to see a clearer picture about the factors beyond tax rate that actually impact property tax payments.
In Louisiana, for example, property taxes are so low because many counties have small populations, with lower assessed home values. Often this can bring down average property taxes to somewhere around $250 per year, according to Tax-Rates.org. Similarly, West Virginia's average home value is about 55% below the current U.S. average.
On the other hand, the property values in Hawaii are clearly far higher than the other states on this list. This higher average home value plays a significant role in the amount of property taxes collected - while the overall rate remains relatively low, in part, because public school is funded in Hawaii at the state level, and not locally.
Alabama is in a similar scenario to Louisiana with lower home values, but there is an addition here. The Alabama Constitution limits the amount of property taxes that can be raised, which leaves legislators looking to raise funds from other taxes.
Likewise, Delaware has a constitution similar to Alabama, with a cap on the amount of property taxes to be levied. Instead, the corporate economy tends to pick up the tax revenue slack in the case of Delaware.
Overall, there are multiple factors to consider before packing up to move to what might seem like a cheaper state. When it comes to property taxes, there could be a reason taxes are so low - or so high. By understanding the variables at work a bit better, potential homebuyers can make the best decision on where to move, and how to maximize their budget.
On the date of publication, Amy Legate-Wolfe did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
