Which states have no property tax

Only two states have no property tax at all: Alaska and Hawaii. Both states do not levy a statewide property tax on real estate or personal property. However, this does not mean property owners in these states pay nothing — local governments in Alaska and Hawaii fund themselves through other revenue sources, including sales tax, income tax, and business taxes.

If you own property in Alaska or Hawaii, you will not receive a property tax bill from the state. Some Alaska municipalities do charge local property taxes, so the actual tax burden depends on which city or borough you live in. Hawaii has no local property taxes either, making it the only state with truly zero property tax at any level of government.

Key Takeaways

  • Alaska and Hawaii are the only two states with no statewide property tax, though some Alaska municipalities still charge local property taxes.
  • States without property tax make up revenue through sales tax, income tax, business taxes, and other fees instead.
  • Hawaii has zero property tax at both state and local levels, while Alaska's tax situation varies by municipality.
  • Moving to a no-property-tax state does not eliminate all taxes — you will likely pay higher sales tax or income tax instead.

How Alaska handles property tax by location

Alaska's property tax system is unusual because the state itself does not tax property, but individual municipalities can and do. About half of Alaska's municipalities charge property taxes, while the other half do not. The tax rate and what is taxed varies widely depending on which city or borough you live in.

If you own a home in Anchorage, Juneau, or Fairbanks, you will pay local property tax. If you own property in a municipality that does not tax property — such as some rural areas — you will not. Before buying property in Alaska, check with the specific municipality where the property is located to learn whether that area charges property tax and at what rate.

Alaska funds state services partly through oil revenue and a permanent fund dividend paid to residents, which reduces the state's reliance on property tax. However, this does not mean property owners escape taxation entirely if they live in a taxing municipality.

Why Hawaii has no property tax

Hawaii abolished its property tax in 1973 and has maintained that policy for over 50 years. The state funds government operations through income tax, general excise tax (a sales tax applied to most goods and services), and business taxes. Hawaii's general excise tax rate is 4 percent statewide, though counties can add an additional 0.5 percent.

Because Hawaii has no property tax at any level — state or county — homeowners and landlords do not receive property tax bills. This makes Hawaii unique among all 50 states. However, property owners still pay other taxes and fees, including real property tax on business property used for commercial purposes, which operates differently from residential property tax.

How other states compare

While Alaska and Hawaii are the only states with no property tax, several states have very low property tax rates. New Jersey, Illinois, Connecticut, and Texas all have property tax rates below 1 percent in some areas, though they still charge property tax statewide. States like Wyoming, South Dakota, and Nevada have no income tax but do charge property tax.

The relationship between property tax and other taxes varies by state. States without property tax typically compensate by charging higher sales tax or income tax. For example, Hawaii's general excise tax is higher than most states' sales taxes. Before relocating for tax reasons, compare the total tax burden across property tax, income tax, and sales tax in your current state and your target state.

What property owners still pay in no-property-tax states

In Alaska and Hawaii, you will not pay property tax, but you will pay other taxes and fees. Both states charge sales tax on purchases. Alaska's statewide sales tax is 0 percent, but most municipalities add a local sales tax ranging from 1 to 7.5 percent. Hawaii's general excise tax of 4 percent applies to most goods and services, making it one of the highest consumption taxes in the country.

Property owners in both states also pay fees for services that other states fund through property tax. These may include water and sewer fees, trash collection, and road maintenance fees. Some municipalities charge annual vehicle registration fees or business licensing fees. In Hawaii, commercial property owners pay a real property tax on business property, which is separate from the residential property tax that does not exist.

Additionally, homeowners in both states pay homeowners insurance, which is often higher in Hawaii due to hurricane and natural disaster risk. When calculating the true cost of homeownership, factor in these additional expenses alongside the absence of property tax.

Moving to Alaska or Hawaii for tax reasons

If you are considering relocating to Alaska or Hawaii to avoid property tax, research the total tax picture first. Calculate what you currently pay in property tax, income tax, and sales tax in your home state, then compare it to what you would pay in Alaska or Hawaii. The savings from eliminating property tax may be offset by higher sales tax or income tax.

In Alaska, your savings depend on which municipality you choose. Living in a municipality that does not charge property tax could save you thousands annually, but living in Anchorage or Fairbanks means you will still pay local property tax. In Hawaii, you will definitely avoid property tax, but the general excise tax of 4 percent applies to almost everything you buy, including groceries and utilities.

Other factors beyond taxes should influence your decision to move. Both Alaska and Hawaii have higher costs of living for housing, groceries, and utilities compared to the mainland. Job availability, climate, and distance from family matter as much as tax rates when deciding whether to relocate.

Frequently Asked Questions

Do I have to pay property tax if I own land in Alaska?

It depends on which municipality your land is in. If your property is in a municipality that charges property tax — such as Anchorage, Juneau, or Fairbanks — you will pay property tax. If it is in a municipality that does not tax property, you will not. Check with your specific city or borough before buying.

Is Hawaii really the only state with zero property tax everywhere?

Yes. Hawaii has no property tax at the state level and no local property taxes at the county level. This makes it the only state where no property owner pays property tax on residential real estate, regardless of where in the state they live.

If there is no property tax in Alaska and Hawaii, how do schools get funded?

Schools in both states are funded through state income tax, sales tax, business taxes, and other revenue sources. In Alaska, oil revenue also contributes to state funding. Both states allocate a portion of general tax revenue to education rather than relying solely on property tax as many mainland states do.

Would I save money moving to Hawaii to avoid property tax?

Not necessarily. While you would eliminate property tax, Hawaii's general excise tax of 4 percent applies to groceries, utilities, and most services — costs that are often untaxed or taxed differently on the mainland. Compare your total current tax burden against what you would pay in Hawaii before deciding.

Can I claim homestead exemption in Alaska or Hawaii?

Hawaii has no property tax, so homestead exemption does not explore. In Alaska, homestead exemption rules vary by municipality. Municipalities that charge property tax may offer exemptions for primary residences, but you must check with your specific municipality for their rules.