It’s no big secret that property tax rates have been on a steady rise for the past few years. With the marked boom in homeownership that followed the 2020 COVID-19 pandemic, many investors saw the value of their properties soar to unprecedented highs.
However, as with most things, what goes up must come down. The market has been showing some changes in the form of stagnation, longer listing periods, as well as a dwindling interest in the luxury properties that fueled the STR (short-term rental) craze of the early 2020s. This left many owners with expensive properties that rack up high property taxes and no way to pay up. That’s where smart investors step in to take advantage of the discrepancy.
To take a close look at this phenomenon, we combined data from the Tax Foundation and RedFin, a national real estate brokerage, that shows exactly how much property taxes people are paying in each of the 50 states (plus D.C.). We’re also examining the 5 states with the highest property tax bills were also examined, what led to their place on the list, as well as how smart investors are capitalizing on the gains.
Property Tax on the Median Home By State
| Rank | State | Tax Rate | Median home value | Annual property tax on median home |
|---|---|---|---|---|
| 1 | New Jersey | 1.88% | $561,000 | $10,547 |
| 2 | Illinois | 1.88% | $296,000 | $5,565 |
| 3 | Connecticut | 1.54% | $482,000 | $7,413 |
| 4 | Vermont | 1.51% | $431,000 | $6,508 |
| 5 | New Hampshire | 1.50% | $515,000 | $7,725 |
| 6 | Nebraska | 1.44% | $293,000 | $4,219 |
| 7 | Texas | 1.40% | $344,000 | $4,816 |
| 8 | Ohio | 1.36% | $261,000 | $3,550 |
| 9 | Iowa | 1.33% | $241,000 | $3,205 |
| 10 | Wisconsin | 1.32% | $328,000 | $4,330 |
| 11 | New York | 1.30% | $501,000 | $6,513 |
| 12 | Pennsylvania | 1.26% | $327,000 | $4,120 |
| 13 | Kansas | 1.21% | $293,000 | $3,545 |
| 14 | Michigan | 1.19% | $271,000 | $3,225 |
| 15 | Rhode Island | 1.12% | $515,000 | $5,768 |
| 16 | Massachusetts | 1.00% | $652,000 | $6,520 |
| 17 | Minnesota | 1.00% | $373,000 | $3,730 |
| 18 | South Dakota | 1.00% | $325,000 | $3,250 |
| 19 | Maine | 0.98% | $381,000 | $3,734 |
| 20 | Alaska | 0.94% | $425,000 | $3,995 |
| 21 | Maryland | 0.92% | $509,000 | $4,683 |
| 22 | North Dakota | 0.92% | $297,000 | $2,732 |
| 23 | Missouri | 0.89% | $282,000 | $2,510 |
| 24 | Oregon | 0.81% | $511,000 | $4,139 |
| 25 | Georgia | 0.79% | $379,000 | $2,994 |
| 26 | Oklahoma | 0.79% | $257,000 | $2,030 |
| 27 | Florida | 0.78% | $440,000 | $3,432 |
| 28 | Virginia | 0.78% | $469,000 | $3,658 |
| 29 | Indiana | 0.76% | $270,000 | $2,052 |
| 30 | Washington | 0.75% | $628,000 | $4,710 |
| 31 | Kentucky | 0.74% | $278,000 | $2,057 |
| 32 | California | 0.70% | $818,000 | $5,726 |
| 33 | North Carolina | 0.66% | $401,000 | $2,647 |
| 34 | New Mexico | 0.63% | $364,000 | $2,293 |
| 35 | Montana | 0.61% | $515,000 | $3,142 |
| – | District of Columbia | 0.60% | $1,277,400 | $7,664 |
| 36 | Mississippi | 0.58% | $267,000 | $1,549 |
| 37 | Arkansas | 0.56% | $269,000 | $1,506 |
| 38 | Louisiana | 0.55% | $254,000 | $1,397 |
| 39 | Delaware | 0.54% | $404,000 | $2,182 |
| 40 | Wyoming | 0.53% | $441,000 | $2,337 |
| 41 | Tennessee | 0.52% | $412,000 | $2,142 |
| 42 | West Virginia | 0.51% | $245,000 | $1,250 |
| 43 | Nevada | 0.50% | $498,000 | $2,490 |
| 44 | Colorado | 0.50% | $633,000 | $3,165 |
| 45 | Idaho | 0.50% | $474,000 | $2,370 |
| 46 | South Carolina | 0.49% | $399,000 | $1,955 |
| 47 | Arizona | 0.48% | $463,000 | $2,222 |
| 48 | Utah | 0.48% | $662,000 | $3,178 |
| 49 | Alabama | 0.37% | $284,000 | $1,051 |
| 50 | Hawaii | 0.29% | $961,000 | $2,787 |
Information provided by the Tax Foundation and Redfin Monthly Housing Market Data
5 States Where Property Taxes Are Skyrocketing
These five states have the current top places on the list of property tax values on a median home because they combine a high tax rate with an above-average median home valuation:
1. New Jersey
- Tax Rate: 1.88%
- Property Tax on Median Home: $10,547
With a deadly combination of an almost 2% tax rate, a limited market, and a median home value of $190,000 more than the national figure ($370,000), New Jersey deserves the first place on this list.
2. New Hampshire
- Tax Rate: 1.50%
- Property Tax on Median Home: $7,725
Because the municipalities of New Hampshire don’t have another source of funding, like income or sales taxes, property taxes are reaching all-time record highs.
3. Connecticut
- Tax Rate: 1.54%
- Property Tax on Median Home: $7,413
Continuing with the pattern of a state that requires funding, so it overrelies on property taxes, Connecticut is in the same boat as New Hampshire. It also doesn’t help that state funding for education keeps getting frozen, shifting the load on homeowners instead.
4. Massachusetts
- Tax Rate: 1.00%
- Property Tax on Median Home: $6,520
Although there’s a variation in property value among different areas of Massachusetts, it still scores pretty high on the list of property tax values, even with a rate that is one of the lowest on this list. This could be the result of the recent higher home price valuation than that of commercial property in metropolitan areas, like Greater Boston.
5. New York
- Tax Rate: 1.30%
- Property Tax on Median Home: $6,513
Even though it has a reputation for being the most expensive state, New York is only coming in fifth on this list, thanks to the sheer volume of available properties compared to the previous states.
Bonus: District of Columbia
- Tax Rate: 0.60%
- Property Tax on Median Home: $7,664
D.C. is unequivocally the most expensive place to live or invest in the United States, with the median home value triple the national figure. Even though it has a low tax rate, it still made it to this list.
What Smart Investors Are Doing to Capitalize
Even though “higher taxes” sounds like an all-around negative, this point in time creates opportunities for investors with a keen eye and the right tools.
One tactic to utilize is to invest in REITs (real estate investment trusts), which are companies that operate and finance properties that generate income. Instead of personally handling the management of properties and missing loopholes that can save money on taxes, REITs help investors skip the hard parts.
Another strategy is stepping in to relieve distressed sellers who can no longer afford the rising taxes on their properties. As taxes rise, these occurrences are going to be more common, so knowing how to spot them is crucial. Simply use a property search tool to focus on areas where tax rates saw a recent spike, look up listings where the owner dropped the price, and see if there’s an opportunity to step in and help out.
Final Thoughts
Any change in the economic climate can directly affect investment opportunities. However, an investor who knows how to take advantage of these changes, even skyrocketing taxes, can create value where others only see loss.
