Four states have no property tax on real estate
Four U.S. states do not charge property tax on real estate: Alaska, Delaware, Montana, and New Hampshire. However, "no property tax" does not mean no housing-related taxes. Each of these states uses other revenue sources to fund schools, roads, and local services — and those alternatives can affect what you pay as a homeowner or renter.
Alaska has no state property tax and no state income tax. Delaware has no property tax but does tax income. Montana has no property tax but does tax income. New Hampshire has no property tax and no income tax, but it taxes interest and dividends at 5 percent and has a rooms and meals tax that affects rental properties.
If you are considering a move to one of these states for tax reasons, the actual cost of living depends on what other taxes that state uses instead. A state with no property tax but high income tax may cost you more overall than a state with moderate property tax and lower income tax.
Key Takeaways
- Alaska, Delaware, Montana, and New Hampshire do not charge property tax on real estate, but each uses different taxes to replace that revenue.
- Alaska and New Hampshire have no income tax; Delaware and Montana do tax income, sometimes at higher rates than states with property tax.
- Renters in these states may pay higher rent because landlords pass along other state taxes and fees to tenants.
- Local governments in these states still collect some fees and assessments for schools and services, even though they cannot collect property tax.
How Alaska funds schools and services without property tax
Alaska has no state property tax and no state income tax. The state funds schools and local services through oil revenue, a corporate income tax, and sales tax. Because Alaska's oil fund generates substantial revenue, the state also pays residents an annual dividend — the Alaska Permanent Fund Dividend — which ranges from several hundred to over one thousand dollars per year depending on oil prices and fund performance.
However, Alaska does allow municipalities to impose local property tax if they choose. Anchorage, Fairbanks, and Juneau do charge property tax at rates that vary by borough. So even though Alaska has no state property tax, you may still pay property tax to your local government depending on where you live within the state.
Alaska also charges sales tax, which varies by location from zero to over 7 percent. Some communities have no sales tax at all. Renters in Alaska typically pay less in direct housing costs than renters in states with property tax, but the cost of living is higher overall because of transportation, shipping, and fuel costs.
Delaware's property tax exemption and income tax trade-off
Delaware has no property tax on real estate, but it does tax income at rates ranging from 2.2 percent to 5.75 percent depending on your income bracket. Delaware also charges sales tax at 0 percent on most purchases — Delaware has no sales tax — which makes it attractive for retail and online businesses but does not directly affect homeowners.
Delaware funds schools and local services through income tax, corporate tax, and fees. Because Delaware has no sales tax and no property tax, it attracts businesses and residents seeking lower overall tax burdens. However, if you earn income in Delaware, your state income tax will be higher than in states that rely on property tax instead.
Delaware allows some local assessments and fees for specific services, but these are not property taxes. Homeowners may pay fees for water, sewer, and stormwater management, but these are utility charges rather than ad valorem taxes based on home value.
Montana's property tax exemption with income tax
Montana has no property tax on real estate. The state funds schools and services through income tax, which ranges from 1 percent to 6.9 percent, and through a coal severance tax that generates revenue from mining. Montana also charges sales tax at 0 percent — Montana has no sales tax — on most goods, though some services are taxed.
Because Montana has no property tax, homeowners do not pay annual taxes based on their home's assessed value. However, Montana does tax income, and the rates are moderate compared to other states. If you earn income in Montana, you will file a state income tax return.
Montana allows local governments to impose special assessments for specific improvements like water systems or road maintenance, but these are not property taxes. Homeowners may also pay fees for services, but the bulk of school and county funding comes from state income tax revenue.
New Hampshire's property tax exemption with interest and dividend tax
New Hampshire has no state property tax and no state income tax on wages. However, New Hampshire does tax interest income and dividend income at 5 percent. The state funds schools and services through sales tax (6 percent), rooms and meals tax (9 percent), and business taxes.
New Hampshire allows municipalities to impose local property tax, and most do. So even though New Hampshire has no state property tax, you will likely pay property tax to your town or city. Local property tax rates in New Hampshire vary widely by municipality, from under 1 percent to over 2 percent of assessed home value.
The rooms and meals tax affects renters indirectly because landlords may factor hospitality-related costs into rent prices. New Hampshire's lack of income tax on wages makes it attractive to workers, but the combination of local property tax, sales tax, and meals tax means the overall tax burden depends on your specific situation and spending habits.
How these states fund schools without property tax revenue
States without property tax must replace that revenue with other sources. The four states use different combinations: Alaska relies on oil revenue and corporate tax; Delaware uses income tax and corporate tax; Montana uses income tax and coal severance tax; New Hampshire uses sales tax, meals tax, and business tax.
School funding in these states often comes from state income tax or sales tax rather than local property tax. This means schools depend more on state budget decisions than on local property values. In some cases, schools in these states receive less funding per student than schools in states with robust property tax systems, though this varies by state and year.
Local governments in these states still collect fees and assessments for specific services — water, sewer, roads, fire protection — but these are not property taxes. Some communities also allow voters to approve local income taxes or other fees to fund schools, though this is less common than property tax.
What renters should know about housing costs in these states
Renters in states without property tax do not pay property tax directly, but landlords' costs still affect rent prices. Landlords in these states pay other taxes — income tax, sales tax, or business tax — that they may pass along to tenants through higher rent.
In Alaska and New Hampshire, where property tax is low or nonexistent but other taxes exist, rent may be comparable to or higher than rent in states with property tax. In Delaware and Montana, where income tax replaces property tax, rent depends on the local rental market and landlord costs rather than on the absence of property tax alone.
If you are renting in one of these states, your housing cost is determined by supply and demand in your local market, not by whether the state has property tax. Moving to a state without property tax does not automatically mean lower rent.
Frequently Asked Questions
If a state has no property tax, do I pay zero housing taxes?
No. States without property tax use other taxes to fund services. You may pay income tax, sales tax, or other fees instead. Additionally, some of these states allow local governments to impose property tax even when the state does not, so check your specific city or county.
Can I move to Alaska or New Hampshire and avoid all taxes?
No. Alaska has no income tax but allows local property tax in some areas and charges sales tax. New Hampshire has no income tax but allows local property tax in most municipalities and charges sales tax and meals tax. Both states have taxes; they are structured differently than states with property tax.
Do these states have lower overall housing costs?
Not necessarily. Housing costs depend on local demand, construction costs, and available housing supply. Alaska has high housing costs despite no state property tax because of transportation and construction expenses. New Hampshire's housing costs vary by region and are affected by local property tax rates.
What happens if I own property in a state without property tax but the state allows local property tax?
You will pay property tax to your local government — your city, town, or county — even though the state does not charge it. Local rates vary. Check your specific municipality's tax rate before buying property.
Do renters benefit from living in a state without property tax?
Renters do not pay property tax directly, but landlords' costs affect rent prices. In states without property tax, landlords pay other taxes that may be reflected in rent. Rent in these states is determined by local market conditions, not by the absence of property tax.