Local governments collect property taxes to pay for community needs like public safety, education, infrastructure, street maintenance and recreation. Typically, property taxes are based on home values — and the tax rate varies among municipalities.
There’s no such thing as states with no property taxes. So whether you’re a new homeowner or have been paying taxes on your home for years, you should know how to properly calculate your property taxes by state and ways you can pay those taxes. In addition, make sure that if you’re buying a home, you take every tax deduction you can.
How Much Is Property Tax?
The Council of the District of Columbia establishes property tax rates, which can change from year to year. Here’s how to calculate yours:
- You must pay tax on each $100 of your property’s assessed value.
- To determine the amount of property tax due, divide your property’s assessed value by $100, then multiply that amount by the property tax rate.
For example, assume your tax rate is 1.2% and your house is assessed at $250,000. To determine the property tax, divide $250,000 by 100, which equals $2,500. Now multiply $2,500 by 1.2 — your annual property tax bill is $3,000. Keep in mind this amount excludes homestead or senior citizen deductions, trash services and any other credits.
10 Highest State Property Taxes
The following are the 10 states in which you’ll pay the highest property tax rates. These numbers reflect the average tax rates for each state — your effective tax rate will vary based on your property’s value. Here are 10 states with the highest property tax rates:
|State||Highest Property Taxes|
10 Lowest State Property Taxes
The 10 states with the lowest property taxes are spread all over the country. Hawaii is the wild card on the list — you probably wouldn’t expect a group of beautiful islands to offer the lowest property tax rates. Here are the 10 states with the lowest property taxes:
|State||Lowest Property Taxes|
|District of Columbia||0.56%|
Changes to Property Tax Laws
Changes to property tax laws occur on an individual state or local basis. In California, for example, Proposition 13 — passed in 1978 — states that a property’s assessed value must be based on the property’s purchase price at the time of acquisition.
And the assessed property value in California features a 2% annual cap per year, which means if the property value was $200,000 in 2021, the property value cannot exceed $204,000 in 2022. New Mexico passed a similar law in 2001, which features a 3% annual cap.
When Are Property Taxes Due?
Many people pay property taxes to their lenders with their monthly mortgage payments. Your lender adds your monthly tax amount to your mortgage payment. Your payments go into an escrow account, which the lender uses to pay your tax bill on your behalf. Keep in mind, however, that lenders collect extra money for the escrow account to use as a cushion in case you fall behind on payments.
If you end up paying more property taxes than you owe, you’ll receive a property tax refund. If you underpay your property taxes, you’ll have to make an additional payment. To explore your property tax information, look at your annual escrow statement provided by your mortgage lender. Or look at Form 1098, Mortgage Interest Statement in Box 11 to see the amount of property tax you paid. Your lender is required to mail this form to you by January 31st each year.
You may be able to pay your property taxes directly to your county or taxing authority, if you don’t have a FHA, VA or USDA loan — or a conventional loan that you put less than 20% down on. In any of those circumstances, an escrow account is required.
Property tax payment due dates generally occur twice per fiscal year. If you go this route, make sure you save enough to pay your taxes each year. If you don’t have enough money to pay them your lender could eventually foreclose on your property.
How To Pay Property Tax Online
Many county tax offices give you the option to make a property tax online payment. The easiest way to find out if your county offers this is to call your local tax authority. You can check your county’s tax website by searching the name of the county you live in with the words “tax office” after it.
Once you locate the portal to pay property taxes, follow the specific instructions. You will need to enter basic information and a form of payment. Instructions, forms of payment and surcharges will vary for each county’s tax office.
Cynthia Measom and Elizabeth Constantineau contributed to the reporting for this article.
For this piece GOBankingRates looked at Rocket Mortgage’s “Property Taxes By State: A Comparative Look At The Highest To Lowest States” data to find effective average property tax for each state. All data was collected on and up to date as of June 6, 2022.