Not all states charge property tax, and the ones that do set their own rates
Property tax exists in 49 states, but five states—Alaska, Delaware, Montana, New Hampshire, and Oregon—do not tax real estate. However, New Hampshire and Delaware tax other property like vehicles and business equipment instead. Alaska, Montana, and Oregon have chosen to fund schools and local services through other revenue sources: sales tax, income tax, or both. The states that do charge property tax vary widely in how much they collect—from less than 0.3% of home value per year in Hawaii to over 2% in New Jersey and Illinois.
If you own property or are thinking about buying, knowing whether your state taxes real estate is the first step. The rate you pay depends on your state, your county, and sometimes your city. Even within states that have property tax, neighboring counties can charge very different amounts.
Key Takeaways
- Five states—Alaska, Delaware, Montana, New Hampshire, and Oregon—do not tax residential real estate, though some tax other forms of property.
- The 49 states that do have property tax set their own rates, which range from under 0.3% to over 2% of a home's value each year.
- Your actual property tax bill depends on your state, county, and sometimes city, so two homes worth the same amount can have very different taxes.
- Property tax rates can change year to year based on local budget needs and property assessments in your area.
The five states without property tax on homes
Alaska does not tax real estate at all. Instead, the state relies on oil revenue and sales tax to fund schools and local government. Some Alaska cities do charge a local property tax, but the state itself does not.
Montana exempts residential property from state property tax but does tax commercial and agricultural land. Homeowners in Montana pay school funding through other means, including a statewide school funding tax that is separate from property tax.
New Hampshire does not tax real estate but taxes vehicles, business equipment, and other tangible property. The state funds schools through a combination of local property taxes on non-real-estate items, sales tax, and state education funds.
Oregon taxes real estate but offers a property tax deferral program for seniors and disabled homeowners. For most homeowners, Oregon's property tax rate is among the lowest in the nation at around 0.97% of assessed value.
Delaware does not tax real estate but taxes personal property like vehicles and business assets. The state funds local services through income tax, sales tax, and corporate taxes instead.
How property tax rates vary by state
The states that do charge property tax set rates based on local needs. A county's school district, fire department, and local government all set their own tax rates, which stack on top of each other. This is why two homes in the same state can have very different tax bills.
States with the highest average property tax rates include New Jersey (around 2.49% of home value), Illinois (around 2.27%), and Connecticut (around 2.14%). States with lower rates include Hawaii (around 0.28%), Alabama (around 0.41%), and Louisiana (around 0.55%). These are state averages—your individual bill will be higher or lower depending on your county and city.
Property tax is reassessed regularly, usually every one to five years depending on the state. When your home is reassessed, the tax amount can go up or down based on the new estimated value. Some states cap how much the assessed value can increase in a single year, while others do not.
How property tax is calculated
Property tax is calculated by multiplying your home's assessed value by the local tax rate. The assessed value is not always the same as the market value—assessors use different methods to estimate what your home is worth. Some states assess homes at full market value, while others assess at a percentage of market value.
For example, if your home is assessed at $300,000 and your local tax rate is 1.2%, your annual property tax would be $3,600. If the rate increases to 1.3%, your bill becomes $3,900. The rate can change even if your home's value stays the same, because local governments adjust rates based on their budget needs.
Your property tax bill usually arrives once or twice a year, depending on your state and county. Some areas allow you to pay in installments, while others require a single payment. If you have a mortgage, your lender may collect property tax as part of your monthly payment and hold it in escrow.
States with lower property tax rates
If property tax is a concern for you, some states consistently charge less. Hawaii, Alabama, Louisiana, and Mississippi all have average property tax rates below 0.6% of home value. West Virginia, Arkansas, and Kentucky also fall below 0.7%. Keep in mind that these states may make up the difference with higher sales tax or income tax, so the overall tax burden can still be significant.
Some states offer property tax breaks for specific groups. Many states reduce or defer property tax for seniors, disabled homeowners, or veterans. These programs vary widely by state and county, so check with your local assessor's office to see what may be available to you.
What happens if you don't pay property tax
If you own property in a state that charges property tax and you do not pay, the consequences are serious. Most states allow the county to place a lien on your home, meaning they have a legal claim against it. If taxes remain unpaid for several years, the county can foreclose on the property and sell it at auction to recover the unpaid taxes.
The timeline varies by state—some allow foreclosure after two years of nonpayment, while others wait longer. Before foreclosure, you will receive notices and have opportunities to pay or set up a payment plan. If you are struggling to pay property tax, contact your county assessor's office about payment options or hardship programs in your area.
Frequently Asked Questions
Do I have to pay property tax if I own my home outright?
Yes, in states that charge property tax, you must pay it whether you own the home outright or have a mortgage. The only exception is if your state is one of the five without property tax on residential real estate, or if you may have access to for a local exemption or deferral program.
Can property tax rates change from year to year?
Yes. Local governments adjust tax rates based on their budget needs, and assessors reassess home values periodically. Your bill can increase even if your home's value stays the same, because the rate itself changed. Some states cap how much the rate can increase in one year.
What is the difference between property tax and homeowners insurance?
Property tax is a tax paid to your local government to fund schools and services. Homeowners insurance is a separate payment that protects your home against damage and liability. Both are usually required if you have a mortgage, but they are completely different.
If I move to a state without property tax, do I save money overall?
Not necessarily. States without property tax on homes typically charge higher sales tax or income tax to make up the difference. Compare the total tax burden—property tax plus sales tax plus income tax—before deciding based on property tax alone.
How do I find out what my property tax rate is?
Contact your county assessor's office or tax collector's office. They can tell you your assessed value, your tax rate, and your annual bill. You can also usually find this information on your property tax bill or on your county's website.