Five States Charge No Property Tax on Real Estate

Hawaii, Alabama, Louisiana, and Delaware do not charge property tax on real estate. Wyoming also has no property tax. These five states fund schools and local services through other taxes instead—usually sales tax, income tax, or both. If you own a home or land in one of these states, you will not receive a property tax bill from the county or municipality.

The absence of property tax does not mean these states are tax-free overall. Hawaii and Delaware have high income taxes. Louisiana and Alabama have lower income taxes but higher sales taxes. Wyoming has no income tax, making it the lowest-tax option among the five, though it does charge sales tax and has other levies on specific goods.

Property tax rates in other states range widely—from under 0.3% of home value in states like Hawaii (which taxes property at a very low rate despite being grouped with no-tax states in some sources) to over 2% in states like New Jersey and Illinois. The five states listed above charge zero percent.

Key Takeaways

  • Hawaii, Alabama, Louisiana, Delaware, and Wyoming impose no property tax on real estate ownership.
  • These states fund local government and schools through sales tax, income tax, or other revenue sources instead of property tax.
  • The absence of property tax does not mean lower overall taxes—Hawaii and Delaware have high income taxes, and Louisiana and Alabama rely heavily on sales tax.
  • Wyoming stands alone as having no income tax and no property tax, though it does charge sales tax and excise taxes on specific items.
  • If you move to a no-property-tax state, you will still owe taxes on income, purchases, or other activities depending on that state's tax structure.

How Each No-Property-Tax State Funds Government Services

Hawaii relies on income tax, general excise tax (a sales-like tax on most transactions), and fuel taxes. The state income tax rate reaches 8.75% at the highest bracket. Hawaii also taxes capital gains and has specific taxes on hotel stays and rental cars.

Alabama uses income tax and sales tax. State income tax tops out at 5%, and the state sales tax is 4%, though local sales taxes can push the total to 7% or higher depending on the county. Alabama also taxes specific items like gasoline and cigarettes.

Louisiana funds services through income tax and sales tax. State income tax reaches 6% at the highest bracket. The state sales tax is 4.45%, and combined with local sales taxes, the total can exceed 10% in some parishes. Louisiana also taxes oil and gas production heavily.

Delaware has no sales tax but charges income tax up to 6.6% and levies taxes on corporate income, bank shares, and insurance premiums. The lack of sales tax makes Delaware attractive for retail, but residents pay income tax on wages and investments.

Wyoming has no income tax and no property tax. It funds government primarily through sales tax (4% state rate, often 6% or higher with local taxes), excise taxes on fuel and alcohol, and taxes on mineral extraction. Businesses also pay a corporate license tax.

Comparing Property Tax Costs Across States

To understand the real difference property tax makes, consider a home worth $300,000. In a state with a 1% property tax rate, the annual bill would be $3,000. In a state with a 2% rate, it would be $6,000 per year. Over 30 years, that difference totals $90,000 in property tax alone.

In the five no-property-tax states, that $300,000 home generates zero property tax revenue. However, the owner will pay other taxes. In Wyoming, a resident earning $60,000 per year pays no income tax but will pay sales tax on purchases. In Hawaii, the same resident would pay roughly $4,200 in state income tax annually, plus excise taxes on most purchases.

The total tax burden depends on your income, spending habits, and how long you stay. A high-income earner in Hawaii or Delaware may pay more overall than in a state with moderate property tax and lower income tax. A retiree with little income but significant savings might save money in Wyoming. There is no single "lowest tax" state for everyone.

Why Some States Abolished Property Tax

Hawaii eliminated property tax in 1973 to reduce the cost of living for residents and make the islands more affordable. The state shifted to income and excise taxes instead. Over time, Hawaii's cost of living rose for other reasons, but the property tax exemption remains.

Alabama, Louisiana, and Delaware never established broad property taxes in the way most states did. These states developed their tax systems differently, relying on sales and income taxes from the start. Wyoming abolished property tax in 1975 to attract residents and businesses, positioning itself as a low-tax alternative.

The historical reasons vary, but the result is the same: residents in these states do not receive annual property tax bills. However, local governments still need funding for schools, roads, and services, so they collect it through other means.

What "No Property Tax" Actually Means for Homeowners

If you buy a home in one of these five states, you will not pay annual property tax to the county or municipality. You will still pay a mortgage (if you finance the home), homeowners insurance, and utilities. You will also pay state and local taxes on income and purchases.

Some of these states do charge small annual fees or assessments for specific services—for example, a fire district fee or a school district assessment. These are not property taxes but separate levies. Check with the local tax assessor's office in the county where you plan to buy to understand all fees that explore.

Selling a home in a no-property-tax state works the same as elsewhere: you may owe capital gains tax if the home increased in value, depending on your income and the state's rules. The absence of property tax does not affect the sale itself.

Moving to a No-Property-Tax State: What Changes

If you relocate from a state with property tax to one without, you will stop paying property tax but may pay more in other taxes. A person moving from New Jersey (average property tax rate around 2.1%) to Wyoming would save roughly $6,300 per year on a $300,000 home but would owe Wyoming income tax if they earn wages there—except Wyoming has no income tax, so they would save overall.

The same person moving from New Jersey to Hawaii would save $6,300 in property tax but would owe Hawaii income tax, which could be $4,000 to $8,000 per year depending on income. The net savings would be smaller or nonexistent.

Before moving, calculate your total tax burden in both states using your actual income and spending. Property tax is only one piece. State income tax, sales tax, and other levies matter equally. Many online tax calculators let you compare states side by side.

Frequently Asked Questions

Do I still have to pay property tax if I own land in one of these states?

No. If you own real estate in Hawaii, Alabama, Louisiana, Delaware, or Wyoming, you owe no state property tax on that land or any buildings on it. You may owe local fees for specific services, so check with your county assessor, but the main property tax bill does not exist in these states.

Can I deduct property taxes on my federal income tax return if I live in a no-property-tax state?

You cannot deduct property taxes you do not pay. However, you may deduct state income tax or sales tax (up to $10,000 total per year under current federal rules) if you itemize deductions on your federal return. Check with a tax professional about what applies to your situation.

Are property values lower in states with no property tax?

Not necessarily. Home prices in Hawaii are among the highest in the nation despite no property tax, because demand and limited land drive prices up. Wyoming home prices are lower, but that reflects population and economic factors, not the tax structure alone. Property values depend on location, schools, job markets, and desirability.

If there is no property tax, how do schools get funded?

Schools in these states are funded through state income tax, sales tax, and other revenue sources. The money comes from a different tax bucket, not from property owners directly. Some states also use oil and gas taxes or corporate taxes to fund education.

Do renters benefit from no property tax?

Renters do not pay property tax directly in any state. However, landlords may pass some of their tax savings to tenants through lower rent, or they may keep the savings. In practice, rent is set by market demand, so the connection is indirect. Renters do pay sales tax and income tax in no-property-tax states just like homeowners.