Property Tax is an annual levy on real estate, calculated as a percentage of the property's assessed value. It's typically the largest source of revenue for local governments.
How It's Calculated
Property Tax = Assessed Value × Tax Rate (Mill Rate)
For example: A home assessed at $300,000 with a 1.5% rate pays $4,500/year.
State Variations
| State | Avg Effective Rate | Rank |
|---|---|---|
| New Jersey | 2.23% | Highest |
| Illinois | 2.07% | 2nd |
| New Hampshire | 1.93% | 3rd |
| Texas | 1.68% | 6th |
| Hawaii | 0.29% | Lowest |
Hidden Costs for Renters
Even if you rent, you indirectly pay property tax — landlords factor it into rent prices. High property tax states often have higher rents as a result.
No-Income-Tax Tradeoff
States like Texas have no income tax but compensate with higher property taxes. Make sure to calculate the total tax burden, not just one component.