Five States Charge No Property Tax on Residential Real Estate
Five states—Hawaii, Alabama, Louisiana, Delaware, and Wyoming—do not charge property tax on residential homes. However, "no property tax" does not mean no housing costs to the government. Each of these states funds schools, roads, and local services through other taxes: sales tax, income tax, corporate tax, or some combination. Understanding what you actually pay in these states requires looking beyond the property tax line.
The absence of property tax sounds like a major savings, but the math depends on where you are moving from. A homeowner relocating from New Jersey or Illinois, where property taxes run 2 percent of home value annually or higher, will see real relief. Someone leaving a low-tax state like South Dakota may find the overall tax burden similar or higher once sales tax and income tax are factored in.
Key Takeaways
- Hawaii, Alabama, Louisiana, Delaware, and Wyoming impose no property tax on residential homes, though each funds local government through other revenue sources.
- Hawaii and Delaware have high income taxes; Alabama and Louisiana have high sales taxes; Wyoming has no income tax but moderate sales tax.
- Property tax savings in these states are often offset by higher income or sales taxes, so total tax burden depends on your income and spending patterns.
- Even in no-property-tax states, you still pay homeowners insurance, maintenance, and mortgage interest—property tax is only one housing cost.
Hawaii: No Property Tax, High Income Tax
Hawaii does not tax the value of residential real estate. However, Hawaii has the fourth-highest state income tax rate in the nation, ranging from 1.4 percent to 11 percent depending on income bracket. The state also charges a 4.17 percent general excise tax on most goods and services, which functions similarly to a sales tax.
For a retiree with no earned income, Hawaii's lack of property tax is genuinely valuable. For a working household, the income tax often outweighs the property tax savings. Hawaii also has a high cost of living overall, driven partly by shipping costs to the islands and limited land supply.
Alabama: No Property Tax, High Sales Tax
Alabama does not tax residential property. The state compensates through a 4 percent state sales tax, plus local sales taxes that can push the total to 7 or 8 percent in some counties. Alabama also has a state income tax ranging from 2 percent to 5 percent.
The sales tax burden falls heaviest on households that spend most of their income locally. Someone who buys groceries, gas, and household goods in Alabama pays the tax on each purchase. Retirees living on fixed income and spending modestly may come out ahead compared to property-tax states.
Louisiana: No Property Tax, High Sales Tax
Louisiana exempts residential property from state property tax. The state relies on a 4.45 percent state sales tax, plus local additions that can reach 10 percent or higher in some parishes. Louisiana also charges state income tax from 2 percent to 6 percent.
Like Alabama, Louisiana's revenue model depends on sales tax, which means your tax burden correlates with how much you spend. The state also offers some property tax exemptions for homeowners over 65 and for disabled veterans, which can further reduce housing costs for those groups.
Delaware: No Property Tax, High Income Tax
Delaware does not tax the value of residential real estate. The state has no sales tax, which is unusual among no-property-tax states. However, Delaware's income tax ranges from 2.2 percent to 5.75 percent, and the state charges a 3.75 percent tax on corporate income.
Delaware's lack of sales tax is a genuine advantage for high-spending households. The income tax is moderate compared to Hawaii's, making Delaware attractive to retirees with pension income or investment returns. The state's small size and proximity to major East Coast cities also influence housing costs independent of taxes.
Wyoming: No Property Tax, No Income Tax
Wyoming charges neither property tax nor state income tax on residents. The state funds schools and local government through a 4 percent sales tax, plus local additions that vary by county. Wyoming also taxes mineral extraction heavily, which historically funded much of the state budget.
Wyoming's combination of no property tax and no income tax is the most tax-favorable for working households and retirees alike. However, Wyoming has a small population, limited urban areas, and a cost of living that varies dramatically by region. Housing prices in Jackson Hole or Cheyenne reflect demand and geography more than tax policy.
How Property Tax Savings Compare to Other State Taxes
The real question is not whether a state has property tax, but what your total state and local tax burden will be. A homeowner with a $300,000 house in New Jersey pays roughly $6,000 to $8,000 per year in property tax alone. That same homeowner in Alabama pays zero property tax but pays sales tax on every purchase and income tax on wages.
The table below shows how the five no-property-tax states fund government differently:
| State | Property Tax | Income Tax | Sales Tax |
|---|---|---|---|
| Hawaii | None | 1.4–11% | 4.17% excise tax |
| Alabama | None | 2–5% | 4% + local |
| Louisiana | None | 2–6% | 4.45% + local |
| Delaware | None | 2.2–5.75% | None |
| Wyoming | None | None | 4% + local |
A retiree living on Social Security and pension income benefits most from Wyoming or Delaware, since neither state taxes that income. A working household with high income may prefer Alabama or Louisiana if they spend conservatively. Someone with significant investment income might favor Wyoming's lack of income tax.
What Property Tax Savings Do Not Cover
Homeownership costs extend far beyond property tax. You still pay homeowners insurance, which varies by state and home value but typically runs $800 to $2,000 per year. You pay mortgage interest (if you have a mortgage), which is a housing cost even though it is not a tax. You pay for maintenance, repairs, utilities, and HOA fees if applicable.
Property tax is one line item in a much larger budget. Eliminating it saves money, but it does not eliminate the need to budget for housing. In fact, some of these states have higher homeowners insurance costs or higher overall cost of living, which can offset tax savings.
Frequently Asked Questions
Do I still pay property tax on land or rental property in these states?
Rules vary. Most of these states exempt only primary residences or owner-occupied homes. Land, investment property, and rental homes may be taxed differently. Check your specific state's rules before buying property for investment.
If I move to one of these states, do I get a refund on property taxes I paid in my old state?
No. Property taxes are paid to the state and county where the property is located. Once you sell a home in a high-property-tax state, you stop paying tax on it. You do not receive a refund for past taxes paid.
Are there any property tax exemptions for seniors or disabled people in these states?
Yes, several of these states offer exemptions or reductions for homeowners over 65 or disabled veterans. Louisiana and Alabama both have senior exemptions. Check your state's department of revenue or assessor's office for current programs.
Does "no property tax" mean lower home prices in these states?
Not necessarily. Home prices depend on demand, location, job market, and housing supply. Wyoming and Hawaii have high home prices despite no property tax, because people want to live there. Alabama and Louisiana have lower average home prices, but that reflects regional economics, not tax policy alone.
Can I deduct property taxes on my federal income tax return if I live in a no-property-tax state?
You can deduct state and local taxes (SALT) up to $10,000 per year on your federal return. If you pay no property tax but pay income tax or sales tax, those may be deductible instead. Consult a tax professional about your specific situation.