Even if you rent instead of own, property tax still is an important component of your housing cost. Your landlord will take the tax on his house – your home – into account to calculate your rent. So either way, real-estate tax is a factor in your cost of living well worth considering. How high or low your effective real-estate tax is, varies by state. New Jersey has the highest rate, at 2.35%. Hawaii the lowest, at 0.27%.
But, as this graph shows, those percentages only tell half the story. Each hexagon represents a state. Hexagons in lighter shades of red have lower effective real-estate taxes. Darker reds mean higher property taxes. Each hexagon also mentions the annual property tax for a house of median value in that state and is scaled for that value: bigger hexagons mean higher property taxes, and vice versa.
The data used to create this ranking were collected by Wallethub.com from the U.S. Census Bureau. It should be noted that these annual property taxes are a compound of the tax rate and the median house price, both of which vary per state, and independently of each other. Which means that you can live in a state with a low property tax but high median house prices, and end up paying more than someone in a state with a higher property tax rate, but lower median house prices. Take Hawaii, for example. The state with the lowest real-estate tax rate in the country also has the highest median house value of any state. At $515,300, the median Hawaiian home is worth almost three times as much as the median U.S. home ($178,600). That translates into an annual tax on the median home in Hawaii of $1,391. Hawaii may have the lowest property tax in percentages, but in absolute amount, it comes in only at 18th place.
So, which state has the cheapest property tax in dollar terms (if not the lowest, percentage-wise)? That would be Alabama, light red because it has the second-lowest effective real-estate tax rate (0.43%), but with a median house value well below the national figure, at $125,500. That gives an annual property tax of $540, almost two-thirds less than Hawaii’s.
New Jersey, by the way, is burdened not only by the highest property tax in the land, but also by one of the highest median house values, at $315,900. That is #5 nationwide, after Hawaii, DC ($475.8k), California ($385.5k) and Massachusetts ($333.1k). And that makes for an annual property tax on that median-value house in New Jersey of $7,424. Not only is that more than in any other state in the Union, it is also almost triple the amount as in DC, where real-estate tax is only 0.56%, and the median-valued house in DC consequently only owes $2,664 in property tax.
Further illustrating the importance of aggregating tax rate and house value is Connecticut, where the median house is valued at $270,500 (#8 in the nation) and taxed at 1.97% (#4 in the nation), giving an effective tax of $5,329 (#2 in the nation).
In other words: if your state hexagon is large and dark on this map, you are likely to pay a whole lot more in property tax than in a state where it is either small or light, especially if it is both. Combining low taxes on low median-value houses gives the lowest median property taxes outside of Alabama in West Virginia ($602), Arkansas ($691), Louisiana ($706) and South Carolina ($797). Who needs to live in Jersey anyway?
Sources: Table 1.1