Property taxes by state range from an average effective rate of about 0.31% in Hawaii to about 1.79% in Illinois, so the same $400,000 home carries a yearly bill near $1,240 in one state and $7,160 in another. Rates also vary by county and by how each assessor values a home.
Property tax is the housing cost you never pay off. A mortgage gets paid off. The tax bill keeps arriving every year for as long as you own the property, and it moves whenever a local assessor revalues the home or a county, city, or school district raises its rate. For a homeowner, it is a permanent line in the budget. For a real estate investor, it is a fixed charge against every dollar of rent before any return shows up.
Where a property sits can change its yearly tax bill by a factor of nearly six, and that one number often decides whether a home is affordable or a rental clears its cost of capital. On a $400,000 home, Illinois's average effective rate produces a bill near $7,160. The same home in Hawaii carries roughly $1,240.
At BetterWealth, we have structured more than 2,000 whole life policies for entrepreneurs, business owners, and real estate investors across all 50 states, and property tax comes up in almost every real estate conversation we have. It is one of the costs that decides whether capital borrowed against a policy can earn more than the carrier's loan rate, which is the central test of The And Asset.
- Illinois carries the highest average effective property tax rate, about 1.79%, and Hawaii the lowest, about 0.31%.
- On a $400,000 home, that spread is roughly $5,920 a year, or $59,200 across a decade.
- States without an income tax often lean harder on property taxes, as New Hampshire and Texas show.
- Property tax is set locally, so rates can differ as much between counties as between states.
- For real estate investors, property tax comes off net operating income before any return clears the loan rate.
- The And Asset rule: never borrow against a policy to pay a tax bill, because that spending earns nothing.
The rates in this guide are approximate statewide averages. Effective rates move every year, and county rates inside a single state can sit far above or below the statewide figure. Confirm your county assessor's current rate before you make a decision on it.
01 / The ProblemWhy Do Property Taxes Vary So Much From State to State?
Property taxes vary because they are set and collected locally, so every state, county, city, and school district builds its own mix of rates, assessment rules, and exemptions. The federal government does not levy a property tax on your home. Your bill funds public schools, emergency services, road maintenance, and the day-to-day operation of local government, and each jurisdiction decides how much of that budget lands on property owners.
The bill itself follows a simple formula. The assessor sets an assessed value, the jurisdiction applies its tax rate to that value, and any exemptions you qualify for come off the result. Assessed value is not always market value. Some states assess at full market value. Others assess at a fixed percentage of it, or on a schedule that lags the market by years.
Why the Effective Rate Is the Number to Compare
Because assessment methods differ, a state's statutory rate tells you little on its own. The effective rate solves that. It is the annual tax actually paid divided by the home's market value, which puts every state on the same footing. A 1.79% effective rate means a home worth $400,000 pays about $7,160 a year, whatever mix of assessment ratios and millage rates produced it.
Compare effective rates, not statutory ones.
02 / The Top FiveWhich States Have the Highest Property Taxes?
Illinois has the highest average effective property tax rate in the country at about 1.79%, followed by New Jersey, Vermont, Nebraska, and Connecticut. These figures are the Tax Foundation's 2026 estimates, built on 2024 Census American Community Survey data, against a national average of 0.85%.
- Illinois, about 1.79%. The highest rate in the country, about $7,160 a year on a $400,000 home. Owners in the Chicago area carry some of the heaviest loads in the state, and those bills have climbed over recent years.
- New Jersey, about 1.68%. About $6,720 a year on a $400,000 home. New Jersey home values run high, so many actual bills land above that figure.
- Vermont, about 1.40%. About $5,600 a year on a $400,000 home.
- Nebraska, about 1.38%. About $5,520 a year on a $400,000 home.
- Connecticut, about 1.36%. About $5,440 a year on a $400,000 home. Owners in Fairfield County face some of the largest property tax bills in the nation, driven by both the rate and high home values.
New Hampshire ranks sixth at about 1.35%, or $5,400 a year on a $400,000 home. With no tax on wages and no statewide sales tax, it funds much of its local budget through property. Texas also ranks in the top ten at about 1.24%. Like New Hampshire, it has no tax on wage income, and states that skip the tax on wages often lean harder on property.
03 / The Bottom FiveWhich States Have the Lowest Property Taxes?
Hawaii has the lowest average effective property tax rate in the country at about 0.31%, followed by Alabama, Arizona, Idaho, and South Carolina. Each state reaches a low rate through a different mechanism.
- Hawaii, about 0.31%. Residential property values are high, and the low rate offsets part of that. A $400,000 home pays about $1,240 a year, though few Hawaii homes trade that low.
- Alabama, about 0.37%. Constitutional limits on property taxation have held rates down for decades. That is about $1,480 a year on a $400,000 home.
- Arizona, about 0.43%. Arizona limits how fast the taxable value of a home can rise each year. About $1,720 a year on a $400,000 home.
- Idaho, about 0.43%. A homestead exemption reduces the taxable value of owner-occupied homes. About $1,720 a year on a $400,000 home.
- South Carolina, about 0.44%. About $1,760 a year on a $400,000 home.
Colorado is also among the lowest-rate states at about 0.52%, or $2,080 a year on a $400,000 home. Revenue limits under TABOR and statewide assessment rules help keep residential rates low.
A low rate on an expensive home can still produce a large bill. Hawaii's rate is the lowest in the country, but on a $1.2 million home it still comes to about $3,720 a year. Run the rate against the price you will actually pay.
04 / The Middle TierWhere the Middle-Tier States Fall
Many states land between roughly 0.6% and 1.5%, a range that adds $2,400 to $6,000 a year to a $400,000 home. The middle of the ranking sits around and below the 0.85% national average, so a middle-tier state is not an average-rate state. A sample of the middle tier:
- Georgia: about 0.77%, or $3,080 a year on a $400,000 home
- Florida: about 0.76%, or $3,040 a year
- Virginia: about 0.75%, or $3,000 a year
- Washington: about 0.74%, or $2,960 a year
- North Carolina: about 0.62%, or $2,480 a year
Two of these five, Washington and Florida, do not tax wage income. Neither escapes property tax despite skipping the wage tax.
05 / The Total PictureDo States Without an Income Tax Charge More in Property Tax?
Often, yes: a state that gives up income tax revenue still has to fund schools and services, and property tax is usually where much of that burden lands. Nine states do not tax wage income:
- Alaska
- Florida
- Nevada
- New Hampshire (historically taxed only interest and dividend income)
- South Dakota
- Tennessee
- Texas
- Washington (taxes certain capital gains but not wages)
- Wyoming
New Hampshire and Texas show the relationship most clearly. Both skip the tax on wages, and both rank among the highest property tax states in the country. The pattern is not universal: Florida and Washington sit in the middle tier near 0.75%, and Nevada and Wyoming each draw on other revenue sources.
A low property tax rate does not make a low-tax state. Rank a state only after you add up every tax it charges you.
Sales Tax Completes the Picture
Property tax hits owners. Sales tax hits every purchase, whether you own or rent. Five states have no statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon, though some Alaska localities and Montana resort areas charge their own. At the other end, Tennessee's 7% statewide rate is among the highest in the country before local add-ons. Local rates change often, so confirm the current figure with your state revenue department.
For a household deciding where to live, the right comparison is the total: income tax on what you earn, sales tax on what you spend, and property tax on what you own. A move that saves $6,000 in income tax and adds $7,000 in property tax is a loss.
Add every tax before you rank a state.
06 / The DriversWhat Drives a State's Property Tax Rate?
Four factors explain most of the gap between states: how heavily the state relies on property tax for revenue, how it funds public schools, how it assesses property, and which exemptions it offers.
Revenue Mix and School Funding
States that depend on property tax for a large share of revenue, New Hampshire being the clearest example, run higher rates than states with a broader mix of income and sales taxes. School funding is the largest single driver inside that mix. In most states, public schools draw a large share of their budget from local property taxes, so states and districts with high per-student spending commitments tend to carry higher rates.
Assessment Practices
States differ in how they determine value and how often they reassess. Some value property at full market value every year. Others assess a percentage of market value, or reassess on multi-year cycles, which can leave two identical homes on the same street with different bills depending on when each last sold or was revalued.
Exemptions and Credits
Many states reduce bills for specific owners through homestead exemptions, senior citizen reductions, veterans' benefits, and circuit breaker programs that cap property tax as a share of household income. These programs apply to owner-occupied homes far more often than to rentals, which is one reason an investor's effective rate can run above a homeowner's in the same county.
Recent Trends: Caps, Migration, and Assessment Fights
Several states cap how fast property taxes can rise. California's Proposition 13 is the best-known example: it caps the base rate at 1% of assessed value and limits annual increases in assessed value to 2% until the property changes ownership. Caps protect long-time owners and shift more of the burden onto recent buyers, whose assessments reset at purchase.
Remote work has also changed where some households choose to live, with some leaving high-tax states for places with lower income and property taxes. Local governments are caught between rising costs and owners who resist higher bills, and disputes over assessment methods and reassessment frequency are growing in many jurisdictions.
Caps reward holding. They penalize buying.
07 / The AppealHow Do You Appeal a Property Tax Assessment?
You appeal by proving the assessor's value is too high, with evidence, before your jurisdiction's deadline. Most states offer a formal process, and the steps look similar almost everywhere:
- Review your assessment. Read the assessment notice and learn how your local assessor calculated your property's value, including the square footage, condition, and comparable sales it relied on.
- Gather evidence. Collect recent sales of similar nearby homes, errors in the assessor's record of your property, and documented conditions that lower its value.
- File an appeal. File your objection within your jurisdiction's deadline. Deadlines differ by state and county and are often short, so check the date on the notice.
- Attend the hearing. Present your evidence at the administrative hearing. Keep the case to value: an appeal challenges the assessed value, not the tax rate.
- Consider professional help. For a large gap between the assessment and market value, a property tax consultant or attorney may be worth the fee.
For an investor holding several properties, an annual review of every assessment is part of managing the portfolio. A $30,000 overassessment at a 1.79% effective rate costs $537 a year, every year, until someone challenges it.
The And Asset Fits a Specific Investor Doing Specific Things.
It Fits You If
- You buy real estate or run a business that produces cash flow
- You underwrite deals after taxes, not before
- You can name a use for capital that beats the loan cost
- You have a 10+ year capital horizon
It Does Not Fit You If
- You want to borrow to cover bills, taxes included
- You need maximum cash in year one
- You want a savings account, not a capital strategy
- You cannot identify a productive use for borrowed dollars
If you are in the first column, a 30-minute conversation will show whether a properly structured policy belongs in your capital plan. If you are in the second, we will tell you that too.
Book a Discovery Call08 / The FrameworkHow Property Taxes Change the Math When You Borrow Against a Policy
Property tax is a fixed carrying cost that comes out of a rental's income before any return is measured, so it directly sets whether capital borrowed against a whole life policy can clear the carrier's loan rate.
Nelson Nash pioneered the idea of using whole life insurance as a personal banking system. Nash's core argument was that you either lose money paying interest to outside lenders, or you lose money to the opportunity cost of capital that sits idle. We respect that foundation. The And Asset shares roots with IBC but operates on different principles.
Where IBC Ends and The And Asset Begins
IBC says you can use the policy as a personal bank for any purchase or bill. The And Asset says you only deploy capital from the policy when the borrowed dollars will produce a return greater than the carrier's loan cost, because anything less is an expensive way to spend money. A property tax payment earns nothing. Borrowing to cover it means paying the loan rate on spending.
Many IBC marketers also say you are paying yourself interest. You are not. The interest goes to the carrier. Your return is what the deployed capital earns elsewhere while the policy keeps compounding, net of mortality and expense charges. Policy loan rates vary by carrier and rate environment. At the time of writing, many carriers fall in the 5 to 6% range, so treat any specific figure as a variable to verify, not a constant.
For a real estate investor, that makes the property tax rate part of the hurdle. The rental's net operating income, after tax, insurance, maintenance, and vacancy, has to beat the loan cost. A high-tax state raises that hurdle before the first tenant moves in.
The math has to work. After taxes, not before.
Borrowing against your policy to pay a property tax bill is not a strategy. It is spending with extra steps, and the interest goes to the carrier.
A Composite: One Rental, Two Tax Bills
Consider a 44-year-old dentist with a practice, preferred non-tobacco, funding a whole life policy at $60,000 a year on a 30/70 base/PUA design: $18,000 of base premium and $42,000 of paid-up additions. This is a representative composite built for illustration, not a single named client, and the policy values are illustrative.
Cash value trails contributions early, as it should. Year one shows about $44,700 of cash value against $60,000 paid. Cash value catches cumulative contributions in year five, at roughly $301,700 against $300,000. By year six, the policy holds about $372,900 against $360,000 contributed, and it keeps compounding net of mortality and expense charges.
In year six, the dentist looks at two nearly identical single-family rentals, each priced at $268,400, each renting for $2,190 a month ($26,280 a year), and each carrying $7,470 a year in insurance, maintenance, and vacancy reserve. One sits in a state with an average effective property tax rate near 1.79%. The other sits near 0.52%. For simplicity, assume assessed value equals the purchase price and ignore closing costs.
The tax bill on the first house is about $4,804. On the second, it is about $1,396. That leaves net operating income of $14,006 on the first and $17,414 on the second, cash yields of 5.22% and 6.49% on the purchase price.
Now apply the test. Funding the purchase with a $268,400 policy loan at an illustrative 5.5% rate costs about $14,762 a year in interest. The first house earns $14,006 and falls short by $756 a year before a single surprise repair. The second earns $17,414 and clears the loan cost by $2,652. Same house, same rent, same policy. The tax rate alone flips the answer.
We underwrite on cash yield, not hoped-for appreciation, so the dentist passes on the first house. On the second, every dollar of net operating income goes to the policy loan, plus $19,000 a year from the practice. At an unchanged 5.5% rate, the loan retires in about 114 months, and the full cash value stays in the policy, compounding net of mortality and expense charges. At direct recognition carriers, loaned dollars can earn a different dividend rate, so confirm how your carrier treats them.
One dollar. Two jobs. The tax bill decides whether both get done.
09 / AffordabilityWho Feels High Property Taxes the Most?
High property taxes hit hardest where income is fixed or home values rise faster than earnings. In high-tax areas, the yearly bill can rival a mortgage payment, and for a long-time owner whose mortgage is paid off, it becomes the largest recurring housing cost left.
- Seniors on fixed incomes. Older owners can struggle to keep up with rising bills on homes they have owned for decades. Senior exemptions and circuit breaker programs exist for this reason, and they are worth checking every year.
- First-time buyers. Lenders include property tax in the monthly housing payment they use to qualify a borrower, so a higher rate shrinks the loan a buyer can get on the same income.
- Owners in fast-appreciating areas. When values climb quickly and assessments follow, property tax can outpace income growth even if the rate never changes.
Investors feel the same pressure in a different place. A rent roll can only rise as fast as the local market allows, while a reassessment can raise the tax line in a single notice.
A rental that looks fine on rent alone can fail the loan-rate test on the tax bill alone. Underwrite the tax first.
The Frameworks Behind 2,000+ Policies, in One Place.
The And Asset Vault holds the calculators, design frameworks, and structuring decisions we use when we help a real estate investor decide whether a deal clears the loan cost. Free, email-gated, no spam.
Open the Vault10 / Head to HeadProperty Taxes by State: Side by Side on a $400,000 Home
Setting the rates against one home value makes the dollar gap concrete. The table pairs each state's approximate average effective rate with its yearly bill on a $400,000 home and the two other taxes that complete the picture.
| State | Avg Effective Rate | Yearly Tax on $400,000 | Tax on Wages | Statewide Sales Tax |
|---|---|---|---|---|
| Illinois | ~1.79% | $7,160 | Yes | Yes |
| New Jersey | ~1.68% | $6,720 | Yes | Yes |
| Vermont | ~1.40% | $5,600 | Yes | Yes |
| Connecticut | ~1.36% | $5,440 | Yes | Yes |
| New Hampshire | ~1.35% | $5,400 | No | No |
| Florida | ~0.76% | $3,040 | No | Yes |
| Washington | ~0.74% | $2,960 | No | Yes |
| Colorado | ~0.52% | $2,080 | Yes | Yes |
| Alabama | ~0.37% | $1,480 | Yes | Yes |
| Hawaii | ~0.31% | $1,240 | Yes | General excise tax |
The high tier. Illinois, New Jersey, Vermont, and Connecticut charge between $5,440 and $7,160 a year on a $400,000 home and also tax wages and sales. For an owner, these states stack three taxes. For an investor, that $5,440 to $7,160 comes straight off net operating income.
The no-wage-tax states. New Hampshire charges $5,400 on the same home but no tax on wages and no statewide sales tax, so a high earner who owns a modest home can still come out ahead. Florida and Washington sit at $3,040 and $2,960, a little more than half New Hampshire's bill, while also skipping the tax on wages.
The low tier. Colorado, Alabama, and Hawaii charge $1,240 to $2,080 on a $400,000 home but tax wages. Hawaii's low rate applies to some of the most expensive homes in the country, so the real bill depends on the price you pay, not the rate alone.
11 / Using the RankingsHow to Use Your State's Property Tax Rank
Your state's rank is a starting point, not an answer. Whether your state sits near the top with Illinois, New Jersey, and Vermont or near the bottom with Hawaii, Alabama, and Arizona, the decision comes down to your county, your property, and your full tax picture. When you compare places to buy or review what you pay now:
- Check state and county property tax rates, because they can differ widely inside one state.
- Add income tax and sales tax to see the full burden, not property tax alone.
- Look up the exemptions and credits you qualify for before you estimate a bill.
- Build property tax into long-term affordability and every rental underwriting model.
Property taxes by state will keep shifting as assessments reset and local budgets change. They also fund the schools and services that support the value of the homes paying them. For a real estate investor using The And Asset, the rule stays fixed: count the tax bill first, and only borrow when what is left still beats the loan cost.
An Honest 30 Minutes on Whether This Fits You.
We have structured more than 2,000 policies across all 50 states. We have seen this strategy work exactly as designed, and we have seen it fail. On a discovery call, we look at your situation, run the numbers, and tell you honestly whether The And Asset belongs in your capital structure, including when it does not. If you would rather learn first, The And Asset and BetterWealth YouTube channels go deep on the math.
Book a Discovery CallFAQProperty Taxes by State: Common Questions
Which state has the highest property taxes?
Illinois has the highest average effective property tax rate in the US, at about 1.79% of home value, per the Tax Foundation's 2026 figures. On a $400,000 home, that works out to roughly $7,160 a year, and county rates within the state vary around that average.
Which state has the lowest property taxes?
Hawaii has the lowest average effective property tax rate, at about 0.31%. High home values offset part of that advantage, but on a $400,000 home the yearly bill is only about $1,240.
What is an effective property tax rate?
An effective property tax rate is the annual property tax paid divided by the home's market value. It lets you compare states fairly, because states assess property differently and some tax only a percentage of market value.
Do states with no income tax have higher property taxes?
Often, but not always. New Hampshire, at about 1.35%, and Texas, at about 1.24%, both rank in the top ten for property tax rates, while Florida and Washington sit near 0.75%, below the 0.85% national average, despite not taxing wages.
Which states have no state income tax?
Nine states do not tax wage income: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire historically taxed interest and dividends, and Washington taxes certain capital gains, so check the details for your situation.
Which states have no statewide sales tax?
Alaska, Delaware, Montana, New Hampshire, and Oregon have no statewide sales tax. Some local governments in Alaska and some resort areas in Montana still charge local sales taxes.
How does California's Proposition 13 limit property taxes?
Proposition 13 caps California's base property tax rate at 1% of assessed value and limits annual increases in assessed value to 2% until the property changes ownership. Voter-approved local levies can add to the base rate.
Can you appeal a property tax assessment?
Yes. Most jurisdictions let you appeal an assessment you believe overstates your home's value, usually by filing before a set deadline and presenting evidence such as recent sales of comparable homes at an administrative hearing.
Should you borrow against a life insurance policy to pay property taxes?
No, under The And Asset framework. A property tax bill earns no return, so borrowing against your policy to pay it means paying the carrier's loan rate on spending. Pay the tax from cash flow and reserve policy loans for activities that out-earn the loan cost.
How do property taxes affect a rental property's return?
Property tax comes out of a rental's net operating income before any return is measured. On a $268,400 rental, the difference between a 1.79% and a 0.52% effective rate is about $3,408 a year, enough to decide whether the deal beats a policy loan rate.
What is The And Asset?
The And Asset is BetterWealth's framework for using a properly structured whole life policy as a capital base. You only borrow against it for an activity that produces a return greater than the carrier's loan cost, so your dollars do two jobs at once: the policy keeps compounding net of mortality and expense charges while the deployed capital earns its own return.
How is The And Asset different from infinite banking?
Infinite banking, as Nelson Nash taught it, frames a whole life policy as a personal banking system for any purchase. The And Asset shares roots with IBC but operates on different principles: you only deploy borrowed capital when the return clears the carrier's loan cost, and the policy is the capital base, not the destination.
- Tax Foundation, Facts & Figures 2026, Table 33: Property Taxes Paid as a Percentage of Owner-Occupied Housing Value: the state effective rates used throughout this article (calendar year 2024).
- U.S. Census Bureau, American Community Survey: home value and real estate taxes paid data used to estimate effective rates.
- California State Board of Equalization: property tax rules under Proposition 13.
- Nelson Nash, Becoming Your Own Banker: the origin of the infinite banking concept.
- IRC Section 7702 (Cornell Law): the tax code definition of a life insurance contract.
- BetterWealth resources: The And Asset book, The And Asset YouTube channel, and the BetterWealth YouTube channel.
I founded BetterWealth to treat life insurance as the wealth and capital tool it actually is, not the product most people get sold. Our team has structured more than 2,000 policies across all 50 states. I wrote The And Asset and host the BetterWealth and The And Asset YouTube channels. If you want an honest read on whether a policy belongs in your real estate plan, book a discovery call. We will tell you if it does not.