Hawaii, a global vacation destination known for its tropical climate, lush rainforests, and sandy beaches, has earned the distinction as the most expensive state in the United States. With a median home value of $808,200 and a cost of living almost twice the national average, this island state nonetheless offers the lowest property tax rates in America.
A Feb. 17 report from WalletHub shows the real estate tax rate in the state at just 0.27 percent of the home value. Using this formula, property owners living in a median-priced home would pay just $2,183 in real estate taxes annually.
According to the World Population Review, only 29 percent of Hawaii’s residents can afford to buy property locally, and grocery prices typically run about 50 percent more than the national average. The state’s median income is $118,223 a year for a family of four.
“Depending on where you live, property taxes can be anything from a minor annoyance to a significant financial strain,” WallHub analyst Chip Lupo said in the report.
“Americans who are considering moving and want to maximize the amount of money they take home should take into account property tax rates, in addition to other financial factors like the overall cost of living, when deciding on a city.”
Citing data from the Census Bureau, Lupo noted that the average household pays $3,119 annually in property taxes. He added that while property taxes may not directly affect the 35 percent of households that rent, everyone bears the cost of property taxes as they influence rental prices and help fund state and local governments.
“Even if a home’s purchase price appears manageable, high property taxes can dramatically increase the overall cost of ownership and strain household budgets,” Mitchell Franklin, Le Moyne College Professor of Accounting said in the report.
“Too many overlook this when making decisions on housing.”
Alabama ranked second for the nation’s lowest property tax rate at just 0.38 percent. With a median home value of $195,100, homeowners pay just $738 a year in real estate taxes.
In Nevada and Colorado, the property tax rate is 0.49 percent, followed by South Carolina at 0.51 percent and Arizona at 0.52 percent. Real estate tax rates in Delaware, Idaho, and Utah are at 0.53 percent. West Virginia completes the top 10 list of the least expensive property tax rates with 0.54 percent.
On the opposite end, New Jersey has the nation’s highest property tax rate at 2.23 percent. With a median home value of $427,600, Garden State homeowners would pay $9,541 a year in real estate taxes.
Illinois ranked the second most expensive state for property taxes, with a 2.07 percent rate, followed by Connecticut at 1.92 percent, and New Hampshire at 1.77 percent. Vermont, New York, Texas, Wisconsin, Nebraska, and Iowa complete the top 10 list for the highest property tax rates—all at more than 1.4 percent.
Franklin added that some state and local governments’ reliance on property taxes can be excessive and unsustainable.
“Local boards often mismanage budgets and rely too heavily on property assessments that are frequently inaccurate or inappropriate,” he said. “Over-taxation risks destabilizing housing markets and eroding community wealth.”
While the World Population Review rated housing in New York as the second most expensive in the nation, the property tax rate of 1.60 percent would cost the average homeowner $6,450 a year, with a median home value of $403,000. This is significantly less than New Jersey homeowners pay.
States with the lowest median home value, ranging from $155,600 to $199,500, include Alabama, Arkansas, West Virginia, Mississippi, Kentucky, Oklahoma, Ohio, and Iowa. Of those, only Iowa and Ohio have tax rates a little above 1.0 percent.
Next to Hawaii, the District of Columbia has the nation’s second-highest median home value at $724,600, but a lower tax rate of 0.58 percent. California’s median home value sits at $659,400 with a 0.71 percent real estate tax rate. Massachusetts took third place with a median home value of $525,800 and a property tax rate of 1.11 percent.
Regarding vehicle taxes, the report indicated that half of states do not charge any property taxes on vehicles. Of those states that do implement property taxes on vehicles, Virginia has the highest rate of 3.97 percent.
