Hawaii is the only state with no property tax on real estate
Hawaii does not levy a property tax on real property — land and buildings. This is unique among all 50 states. Every other state, including those without income tax, collects some form of property tax on real estate. Hawaii's exemption applies to owner-occupied homes, rental properties, commercial buildings, and agricultural land.
However, Hawaii does tax other forms of property. The state collects taxes on business equipment, motor vehicles, and intangible personal property like stocks and bonds. Homeowners in Hawaii also pay other fees: conveyance taxes when buying property (typically 0.5% of the sale price), water and sewer charges, and county assessments for specific services. These costs are separate from property tax but still represent ongoing expenses tied to property ownership.
Key Takeaways
- Hawaii is the only state in the United States that does not tax real property, whether residential or commercial.
- Hawaii residents still pay conveyance taxes when purchasing property, plus water, sewer, and county service fees that vary by island and municipality.
- States without income tax — like Texas, Florida, and South Dakota — still collect property taxes to fund schools and local services.
- Property tax rates and structures vary widely across the remaining 49 states, from under 0.3% in Louisiana to over 2% in New Jersey.
Why Hawaii has no property tax while other states do
Hawaii's exemption from property tax is rooted in its history as a kingdom and territory. When Hawaii was annexed by the United States in 1898, it retained certain tax structures that differed from mainland states. The state constitution, adopted when Hawaii became a state in 1959, did not include a property tax mechanism. Over time, Hawaii funded schools and local services through other revenue sources: conveyance taxes, general excise taxes (a broad sales-like tax), and state income taxes.
Other states without income tax — Texas, Florida, Nevada, South Dakota, Tennessee, Washington, and Wyoming — chose different funding models. They rely heavily on property taxes to support schools, roads, and local government. Property tax is the most stable and predictable revenue source for local governments nationwide, which is why nearly every state uses it. Hawaii's reliance on conveyance taxes and excise taxes instead makes it an outlier, but the trade-off means Hawaii residents pay higher taxes on purchases and transfers.
What Hawaii residents pay instead of property tax
The conveyance tax in Hawaii is the primary substitute for property tax on real estate transactions. When you buy property in Hawaii, you pay a conveyance tax of 0.5% on the sale price. For a $500,000 home purchase, that is $2,500 at closing. This tax goes to the state and county governments. It is a one-time cost at purchase, not an annual recurring fee like property tax in other states.
Beyond conveyance tax, Hawaii homeowners pay county assessments and service fees that vary by island. These cover water, sewer, refuse collection, and county-specific services. Oahu (Honolulu County) charges different rates than Hawaii County (Big Island) or Maui County. These fees are billed annually or semi-annually, similar to property tax bills, but they are narrower in scope — they fund specific services rather than general county operations and schools.
Hawaii also collects a general excise tax of 4% on most goods and services, including rent. This is higher than sales tax in most mainland states and effectively taxes property use indirectly. Renters pay this tax in their rent; homeowners encounter it when hiring contractors or purchasing materials for home repairs.
How property tax works in the 49 states that have it
In all other states, property tax is assessed annually based on the assessed value of real estate. A local assessor determines the market value of your home, applies a local assessment ratio (often 50% to 100% of market value), and multiplies by the local tax rate. Tax rates vary dramatically: Louisiana averages under 0.3% of home value annually, while New Jersey averages over 2%. A $300,000 home in Louisiana might generate $900 in annual property tax; the same home in New Jersey could generate $6,000 or more.
Property tax revenue funds local schools, county government, fire and police departments, roads, and public services. Because schools depend on property tax, communities with higher property values generate more school funding — a structural inequality that persists across the country. Property tax is also the most stable revenue source for local governments; it does not fluctuate with economic cycles the way income tax or sales tax does.
States without income tax still collect property tax because they need the revenue. Texas, for example, has no state income tax but property tax rates average 1.6% to 1.8% statewide — higher than many income-tax states. Florida has no state income tax and property tax rates average around 0.8%, but the state also relies on sales tax (7% base rate) and tourism taxes. The absence of one tax does not mean lower overall tax burden; it usually means a different mix.
Comparing Hawaii's tax burden to other states
Whether Hawaii's lack of property tax results in lower overall costs depends on your income, spending, and property value. A high-income earner who spends little will pay more in Hawaii's income tax (up to 11% on top federal rates) than in a no-income-tax state. A retiree on a fixed income with a $400,000 home would pay no property tax in Hawaii but would pay $6,400 annually in New Jersey or $1,200 in Texas.
The conveyance tax structure also affects long-term costs. If you buy a home in Hawaii and hold it for 30 years, you pay the conveyance tax once. In a property-tax state, you pay annually for 30 years. But if you buy and sell frequently, Hawaii's conveyance tax accumulates. A person who buys and sells a home every five years pays conveyance tax four times over 20 years; a property-tax state resident pays 20 annual bills. The math shifts based on holding period, income level, and property value.
What this means if you own property in Hawaii or are considering it
If you own property in Hawaii, you will not receive a property tax bill. You will receive bills for county assessments, water and sewer, and refuse collection. These are typically lower in total dollar amount than property tax in comparable mainland states, but they are not zero. When you sell, you will owe conveyance tax at closing.
If you are considering buying property in Hawaii, factor in the conveyance tax as part of your closing costs. It is not negotiable and applies to all real estate purchases. Over a 30-year holding period, the absence of annual property tax is a significant advantage compared to high-property-tax states. Over a short holding period (under 10 years), the advantage is smaller because you pay conveyance tax on both purchase and sale.
Renters in Hawaii pay the general excise tax embedded in their rent, which is a cost that does not exist for renters in most mainland states. This makes Hawaii rental costs higher than they would be otherwise, even though property owners do not pay property tax.
Frequently Asked Questions
Do I have to pay property tax if I own land in Hawaii?
No. Hawaii does not tax real property. You will not receive a property tax bill for land or buildings. You will pay county assessments for water, sewer, and services, and you will pay conveyance tax if you buy or sell, but not annual property tax.
What states have no property tax besides Hawaii?
Hawaii is the only state with no property tax on real estate. States like Texas, Florida, and Nevada have no income tax, but they all collect property tax. Every state except Hawaii taxes real property in some form.
Is Hawaii cheaper to live in because there is no property tax?
Not necessarily. Hawaii has high conveyance taxes, high general excise taxes, and high state income tax. Overall cost of living is higher in Hawaii than in most mainland states. The lack of property tax is one factor, but it is offset by other taxes and by the high cost of goods and services on the islands.
If I rent in Hawaii, do I pay property tax indirectly?
You do not pay property tax, but you pay the general excise tax (4%) embedded in your rent. Landlords do not pay property tax either, but they factor all their costs — including conveyance tax, excise tax, and county assessments — into rental rates. Rents in Hawaii are high for many reasons, including these tax structures.
What happens to Hawaii school funding without property tax?
Hawaii funds schools through state income tax, general excise tax, and conveyance tax revenue. Schools are funded at the state level rather than by local property tax, which means funding is more uniform across islands but also means schools compete for state budget dollars alongside other state services.