Hawaii is the only U.S. state with no property tax

Hawaii does not charge a property tax on real estate. Instead, the state funds itself through income tax, general excise tax (a sales-like tax on most goods and services), and other revenue sources. If you own land or a home in Hawaii, you will not receive an annual property tax bill from the state or county.

This makes Hawaii unique among all 50 states. Every other state collects property tax in some form, though the rates and what counts as taxable property vary widely. Some states tax only real estate; others tax personal property like vehicles and equipment as well.

Key Takeaways

  • Hawaii is the only state in the U.S. that does not charge property tax on real estate.
  • Hawaii funds state services through income tax, general excise tax, and other revenue sources instead of property tax.
  • Property tax rates in other states range from less than 0.3% to over 2% of home value annually, depending on location.
  • Moving to Hawaii to avoid property tax may not save money overall, because Hawaii's income tax and cost of living are both high.
  • Some states offer property tax breaks for seniors, disabled homeowners, or agricultural land, but these are reductions, not eliminations.

How Hawaii's tax system works instead

Hawaii's general excise tax (GET) is a 4% tax applied to most sales of goods and services in the state. This is broader than a typical sales tax because it applies at multiple stages of production and distribution, not just at the point of sale to the consumer. The result is that prices in Hawaii tend to be higher than on the mainland for the same items.

Hawaii also collects state income tax on wages and investment income. The state income tax rate ranges from 1.4% to 11%, depending on your income bracket. Combined with the general excise tax and federal income tax, the total tax burden on Hawaii residents can be substantial, even without property tax.

Counties in Hawaii do not collect property tax either. Instead, they rely on state funding, licensing fees, and other local revenue sources. This is different from most states, where counties depend heavily on property tax to fund schools, roads, and local services.

Property tax rates in other states for comparison

The states with the lowest property tax rates are Louisiana, Alabama, and Mississippi, where effective rates (the percentage of home value paid annually) fall below 0.5%. States with the highest rates include New Jersey, Illinois, and Connecticut, where homeowners pay over 2% of their home's value each year in property tax.

A home worth $300,000 in a low-tax state like Louisiana might cost $1,500 per year in property tax. The same home in New Jersey could cost $6,000 or more annually. Over 20 years, that difference adds up to tens of thousands of dollars, but it does not account for differences in income tax, sales tax, or the cost of living between states.

Property tax is calculated differently in each state. Some states assess property at its full market value; others use a lower assessed value. Some states offer homestead exemptions that reduce the taxable value for primary residences. These variations mean that two homes worth the same amount can have very different tax bills depending on which state they are in.

Why Hawaii's lack of property tax does not necessarily mean lower overall taxes

Hawaii residents often pay more in total state and local taxes than residents of states with property tax, because the income tax and general excise tax are steep. A family earning $75,000 per year in Hawaii will pay state income tax at rates that start at 1.4% and climb to 6.4% depending on income level. Add the 4% general excise tax on most purchases, and the effective tax rate becomes significant.

The cost of living in Hawaii is also among the highest in the nation. Housing prices, groceries, utilities, and transportation all cost more than the national average. A homeowner in Hawaii avoids property tax but may pay more for rent or a mortgage to live there, and will pay more for goods and services due to the general excise tax.

For someone considering a move to Hawaii specifically to avoid property tax, the math often does not work in their favor. The savings from no property tax are usually offset by higher income tax, higher sales-equivalent taxes, and higher prices for housing and goods.

States that come close to Hawaii's approach

No other state has eliminated property tax entirely, but a few states have very low rates or unusual structures. South Dakota and Wyoming have no state income tax, which appeals to some people, but both collect property tax. Tennessee and Florida also have no state income tax but do tax property.

Some states offer significant property tax reductions for specific groups. Florida, for example, offers a homestead exemption that reduces the assessed value of a primary residence by $50,000, which can cut property tax bills substantially. Pennsylvania and other states offer property tax relief for seniors and disabled homeowners, though these are reductions rather than eliminations.

What property tax pays for in most states

Property tax is the primary funding source for public schools in most U.S. states. It also funds county governments, municipal services like police and fire departments, road maintenance, libraries, and parks. When a state or locality does not collect property tax, it must fund these services through other means—income tax, sales tax, state grants, or fees.

Hawaii's schools are funded by the state rather than by local property tax, which means funding is more uniform across islands but also means the state has less flexibility to respond to local needs. This is one trade-off of the no-property-tax system.

Frequently Asked Questions

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

No. Hawaii does not charge property tax on real estate, regardless of whether you are a resident or non-resident owner. You will not receive a property tax bill from the state or county. However, you may still owe federal income tax on rental income if you rent the property.

If I move to Hawaii, will I pay less in taxes overall?

Not necessarily. Hawaii's income tax and general excise tax are both high, and the cost of living is among the highest in the nation. Most people who move to Hawaii for tax reasons find that their total tax burden and living expenses are similar to or higher than what they paid on the mainland.

Are there any other states with no property tax?

No. Hawaii is the only state that does not collect property tax. Every other state taxes real estate or personal property in some form, though rates vary widely. Some states offer large exemptions or reductions for certain groups, but none have eliminated property tax entirely.

What is Hawaii's general excise tax, and how does it affect prices?

Hawaii's general excise tax (GET) is a 4% tax on most goods and services. Unlike a typical sales tax, it applies at multiple stages of production, which can make prices higher than on the mainland. This tax is built into the cost of almost everything you buy in Hawaii, from groceries to restaurant meals.

How do Hawaii's counties fund schools and local services without property tax?

Hawaii's schools and county services are funded primarily by state revenue from income tax, general excise tax, and other sources. The state distributes funding to counties and schools rather than relying on local property tax. This creates a more uniform system across islands but gives local areas less control over their own budgets.