Property taxes can vary by nearly $8,000 for the same-priced home, depending on where you live in the U.S., a new study reveals.
New Jersey’s average effective tax rate is 2.23%, the highest in all 50 states and the District of Columbia, according to Tax Foundation’s analysis of the Census Bureau’s most recent data.
Hawaii is the lowest-taxed state, with an average effective tax rate of 0.32%.
For a home that’s worth the U.S. median of $416,100, that means New Jersey homeowners would pay $9,279 in property taxes. In Hawaii, the tax bill for the same home would only be $1,332.
When looking at the average effective tax rates for all states and the District of Columbia, the median is 0.91%. Only New Jersey and Illinois have property taxes that are higher than 2%.
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In New Jersey, there’s a strong emphasis on local control of public services, particularly education. Those education costs are amongst the highest in the nation, and they’re mostly paid through property taxes.
Likewise, Illinois has more units of local government than any other state, according to the state’s legislative handbook. These are funded by property taxes, with a big chunk of those taxes paying for education and state employee pension obligations.
By contrast, Hawaii’s government is more centralized at the state level and relies on tourism more than property taxes to pay for government services. As a result, property taxes are the lowest in the country.
However, even with low property taxes, Hawaii is still the most expensive state to buy a house, according to a recent LendingTree study.
Notably, relatively low-tax states like New Hampshire and Texas are amongst the states with the highest effective property tax rates. Since neither state levies income taxes, they’re more reliant on property taxes to pay for a greater share of government services.
For purposes of the study, the average effective property tax reflects average taxes paid against a home’s value, for owner-occupied homes only. The rate was calculated using 2021 U.S. Census data, the most recent available.
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