IRS.com is a privately owned website that is not affiliated with any government agencies.

State Property Taxes

If you’re getting ready to buy a home, you must plan beyond the monthly mortgage payments ? there are also property taxes to consider.

Property tax is a local tax, and a major source of revenue for local governments throughout the United States. Municipal governments are responsible for determining property values, setting tax rates, and collecting taxes for properties located in their jurisdiction.

Property taxes can vary across each state, and from one municipality to the other. Your house may be subject to county property tax, as well as city and/or school district property taxes. Property taxes are also notoriously steep (costing the average New Jerseyan about 7% of their income) and should be taken into account, along with other taxes, if you are deciding whether or not to live in a particular state.

Property is taxed based on its assessed value, which is determined by county assessors on a regular basis. The tax due is calculated by multiplying a property’s assessed value by the tax rate of the applicable city/town/district. Tax is typically paid on an annual or bi-annual basis.

Note that the state government does not benefit from property tax revenue ? it is levied, collected, and used by local governments. Local property assessors are required to maintain up-to-date assessments, as the value of property can change over time. County treasurers collect the property taxes and use the revenue to fund public schools, fire departments, road work, and other community services.

Median property taxes across various states range from 0.24% to nearly 2% of the total value of a home. In the state of Hawaii, the median property tax is approximately $1,338 for a median home value of $560,200. But in New Jersey, median property taxes are a whopping $6,320 for a home value of $364,100.

In most states, religious institutions, charitable organizations, and government-owned properties are not subject to property tax. Many states will also grant a partial property tax exemption to veterans.

There are many state-specific programs that offer relief from property taxes. The state of New York has its ‘STAR Program’ (School Tax Relief) which allows a homeowner to exempt the first $30,000 of the full value of their primary residence from school property taxes. In the state of Illinois, Cook County allows a $20,000 property tax exemption for senior citizens ? though they must reapply for the exemption each year. The state of Pennsylvania offers a ‘Property Tax/Rent Rebate’ program, which provides up to a $975 rebate for senior citizens, widows and widowers, and people with disabilities (income and age limits apply).

If property taxes are influencing your decision about which state to reside in, remember that statistics can sometimes be misleading. Ultimately, it’s a good idea to base your home-buying decision on the property’s value and its expected appreciation in the future.


You May Also Like