You’ve probably heard someone complain that they’re "moving to Texas to escape taxes." It’s a classic line. But then they get there, buy a beautiful home in Austin or Dallas, and suddenly realize their property tax bill is higher than their old mortgage.
That’s the thing about the property tax percentage by state—it’s the ultimate "gotcha" in the American tax system.
Property taxes are basically how your local government keeps the lights on. They pay for the school down the street, the paved road you drive on, and the fire truck that shows up when things go wrong. Because these are mostly local, the rates are all over the map. Some states like Hawaii feel like a tax haven until you see the home prices, while places like New Jersey might make you want to rent forever.
The High-Tax Heavyweights (And Why They’re Like That)
Honestly, if you live in the Northeast or parts of the Midwest, you already know the pain. New Jersey currently holds the crown for the highest effective property tax rate in the country, sitting at roughly 2.23%.
Why? It isn't just "big government." It’s how they fund things. New Jersey relies heavily on local property taxes to fund its public school system, which is consistently ranked among the best in the nation. When the state doesn't take much through income tax or sales tax (compared to its neighbors), the local property owner picks up the tab.
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Illinois isn't far behind at 2.08%. If you’re looking at a $300,000 home in the Chicago suburbs, you aren't just paying for the house; you’re looking at over $6,000 a year just in taxes.
Connecticut and New Hampshire also hover near the top, often exceeding 1.8%. New Hampshire is an interesting case because they don't have a state income tax or a general sales tax. The money has to come from somewhere, so they lean on the land. It’s a trade-off. You keep more of your paycheck, but your house "costs" more to own every single year.
The "Cheap" States That Might Not Actually Be Cheap
On the flip side, we have the low-rate leaders. Hawaii usually takes the gold medal for the lowest property tax percentage by state, often quoted around 0.27%.
Sounds like a dream, right? Well, sort of. Hawaii has the highest median home values in the U.S. A "cheap" starter home there might cost $800,000. So, even with a tiny percentage, the actual dollar amount you send to the government isn't pennies.
Alabama and Colorado are also famously low, typically staying under 0.50%. In Alabama, you might pay less than $1,000 a year for a decent family home. Colorado is a bit of a unicorn—it has low property taxes and relatively high home values, though recent legislative shifts in 2025 and 2026 have been trying to manage the rapid growth in assessed values to keep those bills from skyrocketing.
How the Math Actually Works (The Part Everyone Skips)
Most people look at the percentage and stop there. Big mistake. Your bill is actually a three-part puzzle:
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- Market Value: What your house is actually worth on the open market.
- Assessment Ratio: The percentage of that market value the state actually taxes. (In some states, they only tax 10% of the value; in others, it’s 100%).
- Millage Rate: This is the actual tax rate, usually expressed as "mills" (one-tenth of a cent).
Basically, if your town needs to build a new high school, they don't just raise "the tax rate." They calculate their budget, look at the total value of all property in town, and set a millage rate that covers the gap.
The 2026 Shifts You Should Care About
We’re seeing some weird shifts this year. According to recent data from the Tax Foundation, several states are aggressively overhauling their systems to provide "relief."
In Montana, they just moved to a tiered-rate system. If you live in your home, you get a lower rate. If it’s a second home or a rental? You’re paying more. Indiana is also revamping its homestead exemptions, adding new credits for seniors and disabled veterans to offset the fact that home values have jumped so much lately.
Real-World Examples: The Tale of Two Houses
Let’s look at two homes, both worth $400,000, to see how the property tax percentage by state changes your life.
- House A (New Jersey): At a 2.23% rate, you’re writing a check for $8,920 every year. That’s about $743 a month added to your mortgage payment.
- House B (Arizona): At roughly 0.45%, you’re paying $1,800 a year. That’s only $150 a month.
That $600 monthly difference is enough to buy a nice car or fund a pretty aggressive retirement account. This is why "tax migration" is a real thing. People aren't just moving for the weather; they're moving for the math.
Exemptions: The Secret Discount
Before you pack your bags and move to Alabama, check the exemptions. Most states offer "homestead" exemptions, which knock a chunk of value off your assessment if the house is your primary residence.
Veterans and seniors often get the best deals. For instance, in Florida, a 100% permanently disabled veteran can be exempt from property taxes entirely. Alaska offers a $150,000 exemption on the assessed value for seniors and disabled veterans.
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In Texas, where the rates are high (around 1.47% to 1.6% depending on the county), the state recently increased the mandatory homestead exemption for school taxes. It’s a way of saying, "Yes, our rates are high, but we’ll give you a bigger head start."
What to Do Before You Buy
If you're house hunting, don't just trust the Zillow "Estimated Taxes" box. It’s often wrong.
- Check the "True" Tax: Look up the county assessor's website. See what the current owner pays, but remember: the value might "step up" to the purchase price once you buy it.
- Look for Special Assessments: Some neighborhoods have "Mello-Roos" (in California) or SIDs/LIDs (in Nevada). these are extra fees on top of the property tax for specific infrastructure like sidewalks or streetlights.
- Appeal Your Assessment: If you buy a house and the county says it’s worth $500,000 but you only paid $450,000, you can (and should) appeal. Most people don't realize you can actually fight your tax bill and win.
Property taxes are one of the few certainties in life, but they aren't a fixed cost. They change based on local politics, state laws, and how well you know the system. Whether you're in a high-tax state like New Jersey or a low-tax one like Hawaii, the goal is the same: know the effective rate so you aren't surprised when the bill hits your mailbox in January.
Actionable Next Steps:
- Verify your current assessment: Visit your local County Assessor's website and check if your "Assessed Value" aligns with recent neighborhood sales. If it's higher, file an appeal before the annual deadline.
- Apply for exemptions: If you haven't filed for a Homestead Exemption on your primary residence, do it today. It's often a one-time filing that can save you hundreds or thousands every year.
- Calculate the "Total Tax Burden": If you’re moving, use a cost-of-living calculator that includes both income tax and property tax. A state with no income tax often has higher property taxes, so look at the net impact on your take-home pay.