Which States Have No Property Tax
Only two states have no property tax on real estate: Alaska and Hawaii. Both states do not levy a statewide property tax on land or buildings. However, neither state is tax-free overall—both collect income tax, sales tax, and other revenues to fund schools and services. The absence of property tax does not mean these states are cheaper to live in; housing costs in both are among the highest in the nation because of geography, limited land, and demand.
Some people confuse states with no property tax with states that have very low property tax rates. New Jersey, Connecticut, and Illinois have some of the highest effective property tax rates in the country, while Hawaii and Alaska have none. This matters because property tax is usually the largest tax bill a homeowner pays each year, so the difference between a state with no property tax and a state with a 2% rate can be tens of thousands of dollars over a decade.
Key Takeaways
- Alaska and Hawaii are the only two states with no statewide property tax on real estate.
- Both states fund schools and services through income tax, sales tax, and other revenue sources instead of property tax.
- The absence of property tax does not make these states affordable—housing prices in both are significantly higher than the national average.
- Some counties or municipalities in other states may offer property tax exemptions for specific groups like seniors or veterans, but this is different from having no state property tax.
How Alaska Funds Schools Without Property Tax
Alaska has no statewide property tax and no state income tax. Instead, the state funds education and services through oil revenue, the Alaska Permanent Fund (which distributes oil wealth to residents), sales tax, and federal funding. This funding model depends heavily on oil prices, which means state revenues fluctuate year to year. When oil prices drop, the state faces budget shortfalls and may cut spending on schools and services.
Individual municipalities in Alaska can choose to levy local property taxes, and many do. Juneau, Anchorage, and Fairbanks all have local property taxes that residents pay. So while Alaska has no state property tax, you may still owe property tax to your city or borough. The rate and structure vary by municipality, so checking your specific location is necessary before assuming you will pay nothing.
How Hawaii Funds Schools Without Property Tax
Hawaii has no statewide property tax on real estate. The state funds schools and services through income tax (which applies to residents and visitors), general excise tax (a 4% sales-like tax on most goods and services), and federal funding. Hawaii's economy relies on tourism, military spending, and agriculture, which generate the tax revenue the state needs.
Like Alaska, Hawaii allows counties to levy property taxes, and all four counties—Honolulu, Hawaii, Maui, and Kalawao—do so. Property tax rates in Hawaii counties are low compared to the mainland, but they are not zero. Homeowners in Hawaii pay both state income tax and county property tax, so the total tax burden depends on income level and property value.
Why Other States Still Collect Property Tax
Property tax is the primary funding source for public schools in most states. When a state does not collect property tax, it must raise money another way—through income tax, sales tax, or other sources. Most states choose to use property tax because it is stable, predictable, and tied to property value, which tends to grow over time. A homeowner's property tax bill rises with home value, which means the state's school funding grows as the community becomes wealthier.
States that rely on income tax instead of property tax face a different problem: income fluctuates with the economy. During recessions, income tax revenue drops sharply, which can force cuts to schools and services. Alaska experienced this during the 2015–2017 oil price collapse, when the state had to cut spending significantly. This is why most states use a mix of property tax, income tax, and sales tax—spreading the risk across multiple revenue sources.
Property Tax Exemptions in Other States
While only Alaska and Hawaii have no statewide property tax, many other states offer property tax exemptions or reductions for specific groups. These exemptions are different from having no property tax—they reduce what an individual homeowner owes, but the state still collects property tax from others.
Common exemptions include homestead exemptions (which reduce the taxable value of a primary residence), senior exemptions (for homeowners over a certain age), veteran exemptions (for military service members or veterans), and disability exemptions. The amount of the exemption and who qualifies varies by state. For example, Florida offers a homestead exemption that reduces the assessed value of a primary home by up to $50,000, while Iowa offers a property tax exemption for people over 65 with low income. These programs reduce individual tax bills but do not eliminate property tax statewide.
The Real Cost of Living in Alaska and Hawaii
The absence of property tax in Alaska and Hawaii does not translate to lower overall housing costs. Both states have median home prices well above the national average. In Hawaii, the median home price is typically over $1 million in Honolulu and remains high on the other islands. In Alaska, Anchorage and Juneau have median home prices in the $400,000 to $500,000 range, which is significantly higher than many mainland states.
When you factor in higher purchase prices, higher utility costs (especially in Hawaii), higher food and goods prices due to shipping, and state income tax, the total cost of homeownership in these states is often higher than in states with property tax. A homeowner in Hawaii or Alaska may pay less in property tax but more in other expenses. Before moving to either state for tax reasons, calculate your total tax and living costs based on your specific income and property value.
Frequently Asked Questions
Do I have to pay property tax if I own land in Alaska or Hawaii?
It depends on where your land is located. If you own land in an unincorporated area or a municipality that does not levy property tax, you may owe nothing. If you own land in a municipality that does levy property tax (like Anchorage in Alaska or Honolulu in Hawaii), you will owe local property tax. Check with your city or county assessor to find out whether your specific location has a local property tax.
Can I move to Alaska or Hawaii to avoid property tax?
You can move there, but property tax avoidance alone is usually not a financial win. Both states have high housing prices, high income tax, and high living costs. Unless you are relocating for work or other reasons, the total cost of living is often higher than in states with property tax. Run the numbers for your specific situation before deciding.
What states have the lowest property tax rates?
Hawaii and Alaska have the lowest rates because they have no state property tax (though some municipalities do levy it). Among states that do collect property tax, Louisiana, West Virginia, and Mississippi have some of the lowest effective rates, typically below 0.5% of home value. Rates vary by county within each state, so your actual bill depends on where you live.
If I own property in a state with property tax, can I get an exemption?
Many states offer exemptions for homeowners who meet certain conditions—such as age, disability, military service, or income level. The exemptions available and the amounts vary widely by state and sometimes by county. Contact your local assessor's office or your state's revenue department to learn what exemptions you may be able to use.
Why do Alaska and Hawaii not have property tax?
Alaska chose not to levy property tax because oil revenue provided sufficient funding for state services. Hawaii has no property tax as a policy choice to keep housing more affordable (though this goal has not been fully achieved due to other economic factors). Both states fund schools and services through alternative revenue sources like income tax and sales tax.