A $500,000 home costs $12,300/year in property tax in New Jersey, $1,450 in Hawaii — an 8x spread between the highest and lowest states. The differences are driven by state income tax (no-income-tax states often have higher property tax), school funding models, and assessment caps. If you're house-shopping across metros, running the property tax math for each candidate is one of the highest-impact comparisons you can make.
- 1.Effective property tax rates range from 0.29% in Hawaii to 2.46% in New Jersey — an 8x spread.
- 2.States without income tax (TX, FL, NV, WA, TN, SD, AK, WY) typically have higher property tax to compensate.
- 3.California's Prop 13 caps annual assessment increases to 2%, keeping effective rates lower than statutory rates suggest.
- 4.The SALT deduction is capped at $10,000 combined for state income tax + local income tax + property tax (married filing jointly or single).
- 5.Property tax is included in your monthly mortgage payment via escrow — typically 10-25% of the total monthly cost depending on state.
All 50 States Ranked by Effective Property Tax Rate
Median effective property tax rate as a percentage of home value. Source: Tax Foundation 2024 data and ATTOM Property Tax Analysis.
| Rank | State | Effective Rate | Median Tax on $500K Home |
|---|---|---|---|
| 1 | New Jersey | 2.46% | $12,300 |
| 2 | Illinois | 2.05% | $10,250 |
| 3 | New Hampshire | 1.93% | $9,650 |
| 4 | Connecticut | 1.79% | $8,950 |
| 5 | Vermont | 1.78% | $8,900 |
| 6 | Texas | 1.68% | $8,400 |
| 7 | Nebraska | 1.65% | $8,250 |
| 8 | Wisconsin | 1.61% | $8,050 |
| 9 | Ohio | 1.59% | $7,950 |
| 10 | Iowa | 1.52% | $7,600 |
| 11 | Pennsylvania | 1.49% | $7,450 |
| 12 | Rhode Island | 1.40% | $7,000 |
| 13 | New York | 1.40% | $7,000 |
| 14 | Michigan | 1.38% | $6,900 |
| 15 | Kansas | 1.34% | $6,700 |
| 16 | Maine | 1.24% | $6,200 |
| 17 | South Dakota | 1.17% | $5,850 |
| 18 | Massachusetts | 1.14% | $5,700 |
| 19 | Minnesota | 1.11% | $5,550 |
| 20 | Maryland | 1.05% | $5,250 |
| 21 | Alaska | 1.04% | $5,200 |
| 22 | Missouri | 0.97% | $4,850 |
| 23 | Oregon | 0.93% | $4,650 |
| 24 | Washington | 0.93% | $4,650 |
| 25 | North Dakota | 0.88% | $4,400 |
| 26 | Florida | 0.86% | $4,300 |
| 27 | Oklahoma | 0.84% | $4,200 |
| 28 | Kentucky | 0.83% | $4,150 |
| 29 | Indiana | 0.81% | $4,050 |
| 30 | Georgia | 0.81% | $4,050 |
| 31 | Virginia | 0.80% | $4,000 |
| 32 | Montana | 0.74% | $3,700 |
| 33 | New Mexico | 0.73% | $3,650 |
| 34 | Arkansas | 0.62% | $3,100 |
| 35 | Mississippi | 0.62% | $3,100 |
| 36 | California | 0.71% | $3,550 |
| 37 | North Carolina | 0.78% | $3,900 |
| 38 | Tennessee | 0.66% | $3,300 |
| 39 | Idaho | 0.63% | $3,150 |
| 40 | Arizona | 0.62% | $3,100 |
| 41 | Utah | 0.58% | $2,900 |
| 42 | Nevada | 0.55% | $2,750 |
| 43 | Delaware | 0.55% | $2,750 |
| 44 | West Virginia | 0.55% | $2,750 |
| 45 | District of Columbia | 0.55% | $2,750 |
| 46 | South Carolina | 0.55% | $2,750 |
| 47 | Wyoming | 0.56% | $2,800 |
| 48 | Louisiana | 0.56% | $2,800 |
| 49 | Colorado | 0.51% | $2,550 |
| 50 | Alabama | 0.41% | $2,050 |
| 51 | Hawaii | 0.29% | $1,450 |
Note: Effective rates are statewide medians. Individual counties and cities within each state can vary significantly — Texas property tax in Austin runs higher than the state median, for example, while rural Texas counties are typically lower.
What Drives State-Level Differences
Three primary factors explain the 8x spread between Hawaii and New Jersey.
Factor 1: How the state pays for itself. States without an income tax — Texas, Florida, Nevada, Washington (wages), Tennessee, South Dakota, Alaska, Wyoming, and New Hampshire (wages) — collect a larger share of revenue from property tax. Texas, in particular, combines no income tax with high property tax, which is why its effective rate of 1.68% sits in the top 10 despite the state being a low-tax destination overall.
Factor 2: How public schools are funded. In most states, public K-12 schools are funded largely through local property tax. New Jersey, Illinois, Pennsylvania, Ohio, and Wisconsin all rely heavily on local property tax for school funding — pushing up effective rates in district-rich areas. Hawaii is unusual: it funds schools at the state level, removing one of the main drivers of high local property tax.
Factor 3: Assessment caps. California's Proposition 13 (passed 1978) caps annual assessment increases to 2% as long as the property doesn't change hands. This means a home bought for $100,000 in 1990 may be assessed at roughly $180,000 today — even if it's worth $800,000 — and the owner pays property tax on the lower assessment. Several other states have similar but less restrictive caps: Florida's Save Our Homes (3% cap), Oregon's Measure 50 (3% cap), and Iowa's rollback (variable).
The effective rate in California (0.71%) understates what new buyers actually pay. A new buyer of a $1.2 million California home pays property tax on something close to that purchase price — roughly $13,000/year — while a long-term neighbor pays $2,800/year on the same physical house assessed at $250K. Both have a "0.71% effective rate" by the state median, but the lived experience is radically different.
Run Your Specific Numbers
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The slider hint lists state medians. If you know your specific county or city rate, use that instead — county-level variation can be 50% or more from the state median.
What Property Tax Includes (and What It Doesn't)
The single line item on your tax bill called "property tax" is actually a combination of several distinct levies:
- County tax — funds the county government, sheriff, courts, and county services
- Municipal tax — funds city or town services (police, fire, public works)
- School district tax — funds local public K-12 schools; often the largest single component
- Special district taxes — water, sewer, fire protection, library, transit (varies by location)
- State property tax — relatively small in most states; some states have none at all
When you look at your bill or escrow statement, you may see these broken out separately. Adding them up gives the total annual property tax. Dividing by your home's market value gives the effective rate.
HOA fees are NOT property tax. They go to your homeowner's association for shared services (landscaping, amenities, building maintenance for condos) — not to local government. Your mortgage payment may or may not include HOA fees; they're typically billed separately. When comparing housing markets, factor HOA fees in addition to property tax, especially in condo-heavy markets like NYC, Miami, and San Francisco.
Property Tax and the Mortgage Equation
When you take a mortgage, property tax becomes part of your monthly payment through an escrow account. The lender estimates your annual property tax, divides by 12, and adds that amount to your monthly P&I (principal and interest). Each month they hold the escrow portion in trust; twice a year (or annually) they pay the taxing authority on your behalf.
A typical breakdown of a monthly mortgage payment on a $500K home in New Jersey at 6.74% interest:
- Principal & Interest: $2,597
- Property Tax (escrow, 2.46%): $1,025
- Homeowner's Insurance: $125
- PMI (if applicable): $250
- Total monthly: $3,997
The same purchase in Texas at 1.68%:
- Principal & Interest: $2,597
- Property Tax (escrow, 1.68%): $700
- Homeowner's Insurance: $200 (higher due to weather risk)
- PMI: $250
- Total monthly: $3,747
The same home in Hawaii at 0.29%:
- Principal & Interest: $2,597
- Property Tax (escrow, 0.29%): $121
- Homeowner's Insurance: $150
- PMI: $250
- Total monthly: $3,118
Property tax can account for 5-25% of your total monthly housing cost depending on state. In NJ, IL, NH, CT, and TX, this is real money — enough to change which homes are affordable.
SALT Deduction: The Wrinkle for High-Tax States
The Tax Cuts and Jobs Act of 2017 capped the State and Local Tax (SALT) deduction at $10,000 for itemizers ($5,000 if married filing separately). This combined cap covers:
- State income tax
- Local income tax (NYC, Detroit, Philadelphia, etc.)
- Real estate property tax
- Personal property tax (in states that have it on vehicles)
Before the cap, residents of high-tax states could deduct unlimited state and local tax — effectively cushioning the impact of high property tax through federal tax savings. After the cap, the cushion is gone for anyone who hits $10,000 in combined SALT.
A New Jersey resident with $200,000 in income, paying $8,000 in state income tax and $10,250 in property tax, has $18,250 of state and local tax — but can only deduct $10,000 federally. The remaining $8,250 doesn't help on federal taxes.
The SALT cap is set to expire at the end of 2025 under current law, though political negotiations may extend it. If it expires, high-tax-state residents become marginally better off federally — but no one should make a home-purchase decision today based on a deduction that may or may not exist three years from now.
Common Mistakes
Mistake 1: Looking at statutory rates instead of effective rates. Statutory rates can look misleading. Many states have a high statutory rate paired with low assessment ratios. The effective rate (tax ÷ market value) is what actually hits your wallet.
Mistake 2: Forgetting that property tax compounds with appreciation. Unlike a mortgage payment, which is fixed in dollar amount (for fixed-rate loans), property tax grows roughly with home values. A 5% annual appreciation rate eventually doubles your bill — over a 14-year horizon. Plan for tax growth in your long-term housing budget.
Mistake 3: Not researching county and city-level rates. State medians hide enormous local variation. Within New Jersey, Bergen County rates can run 30% higher than Cape May County. Always check the specific county and town when running real numbers.
Mistake 4: Assuming PMI and property tax are interchangeable. They're not. PMI protects the lender against default; property tax funds local government. Both go into escrow; they're different line items and follow different rules. PMI drops off automatically at 78% LTV; property tax never drops off (until you sell).
- ✦Effective property tax rates vary 8x across U.S. states — 0.29% in Hawaii to 2.46% in New Jersey on a median home.
- ✦States without income tax often have higher property tax to compensate. Texas combines no income tax with 1.68% property tax.
- ✦California's Prop 13 caps annual assessment increases to 2%, dramatically reducing tax for long-term owners but not new buyers.
- ✦Property tax is included in your monthly mortgage payment via escrow and can run 5-25% of total monthly housing cost.
- ✦SALT deduction is capped at $10,000 — most homeowners in high-tax states no longer get full federal relief for state/local tax.
Related Calculators and Guides
- Property Tax Calculator — compute your specific bill
- Mortgage Calculator — full monthly payment breakdown including taxes
- Cost of Living Calculator — compare metros holistically
- First-Time Homebuyer Guide
- Compare Mortgage Rates
Sources: Tax Foundation 2024 property tax data, ATTOM Data Solutions, U.S. Census Bureau ACS. State effective rates are medians; individual counties and cities vary significantly. This guide is for educational purposes and does not constitute tax or legal advice.
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