Five states charge no property tax on real estate
Hawaii, Alabama, Louisiana, and Delaware do not tax real property — the land and buildings you own. Wyoming also has no property tax on real estate, though it taxes mineral interests separately. These five states fund schools, roads, and local services through other revenue sources: sales tax, income tax, business taxes, or a combination.
The absence of property tax does not mean these states are cheaper overall. Hawaii has the highest cost of living in the nation. Louisiana and Alabama offset lost property revenue with higher sales taxes. Delaware has no sales tax but funds services through income tax and corporate fees. Wyoming relies heavily on mineral extraction taxes and sales tax. A state without property tax may still have a high total tax burden when you factor in what residents pay through other channels.
If you own property in one of these states, you will not receive a property tax bill from the county assessor. You will still owe mortgage interest (which is deductible on federal taxes if you itemize), homeowners insurance, and maintenance costs. Renters in these states do not pay property tax directly, though landlords' lack of a property tax bill may or may not translate to lower rent.
Key Takeaways
- Hawaii, Alabama, Louisiana, Delaware, and Wyoming do not tax real property owned by individuals or businesses.
- These states fund local government through sales tax, income tax, business taxes, or natural resource taxes instead of property tax.
- No property tax does not mean lower overall taxes — Hawaii and Louisiana have high total tax burdens despite the absence of property tax.
- Property owners in these states still pay mortgage interest, insurance, and maintenance; the absence of property tax is one cost removed, not a may provide of affordability.
How these five states fund schools and local services without property tax
Hawaii funds education and local government primarily through state income tax and general excise tax (a sales tax applied at multiple points in the supply chain). The state also collects hotel taxes and tourism-related revenue. Because Hawaii is a single state with no counties, all local services flow through state funding rather than a patchwork of local tax bases.
Alabama and Louisiana both rely on sales tax as their primary revenue source. Alabama's state sales tax is 4 percent, with counties and municipalities adding their own local sales taxes, bringing the total to 7 to 11 percent depending on location. Louisiana's combined state and local sales tax ranges from 7.52 to 10.52 percent. Both states also collect income tax on wages and business income. Louisiana has historically used oil and gas severance taxes as a significant revenue stream.
Delaware has no sales tax but funds schools and local services through income tax on wages and business income, plus corporate franchise taxes. Delaware's corporate tax structure is a major revenue source because many businesses incorporate there for legal reasons, even if they operate elsewhere. Residents pay income tax on wages at rates ranging from 2.2 to 5.75 percent depending on income bracket.
Wyoming has no income tax and no sales tax on most goods. The state funds schools and services almost entirely through mineral extraction taxes (oil, gas, coal, trona), business licenses, and excise taxes on specific products. When mineral prices fall, Wyoming's budget shrinks sharply. The state also taxes mineral interests separately from real property, so owners of mineral rights may owe tax even though real estate owners do not.
What property owners still pay in states with no property tax
Owning real estate in a no-property-tax state does not eliminate housing costs. You will still owe mortgage payments if you financed the purchase. Mortgage interest is deductible on your federal tax return if you itemize deductions rather than taking the standard deduction, but the mortgage itself is a cost you cannot avoid.
Homeowners insurance is mandatory in every state if you have a mortgage, and it is financially necessary even if you own the home outright. Insurance premiums vary by location, home value, and risk factors like flood or hurricane exposure. Hawaii and Louisiana both have higher-than-average insurance costs due to hurricane and tropical storm risk. You will also pay for maintenance, repairs, utilities, and any homeowners association fees if your property is in a planned community.
Some states without property tax impose other real estate-related fees. Wyoming charges a deed recording fee when you purchase property. Hawaii charges a transfer tax when you buy or sell real estate. Louisiana charges a documentary stamp tax on the sale. These are one-time costs at purchase or sale, not annual recurring taxes, but they are real expenses to budget for.
How property tax absence affects home prices and rent
The relationship between no property tax and home affordability is not straightforward. Hawaii has no property tax but the median home price exceeds $1 million in many areas, making it one of the least affordable states in the nation. The lack of property tax does not offset the high cost of land, limited housing supply, and strong demand from tourism and military presence.
Alabama and Louisiana have lower median home prices than the national average, but this reflects regional economic factors, population trends, and job markets more than the absence of property tax. Both states have areas with affordable housing and areas with high prices. A buyer in rural Alabama may find cheaper homes than in urban areas of states with property tax, but a buyer in New Orleans may not.
Renters do not pay property tax directly, but landlords' tax burden affects rent indirectly. A landlord in a no-property-tax state has one fewer annual expense, which could theoretically lower rent. In practice, rent is set by supply and demand, local wages, and what the market will bear. A landlord in Hawaii or Louisiana may charge high rent because demand is high, even though property tax is not a cost factor. A landlord in rural Wyoming may charge low rent because demand is low, regardless of tax policy.
Comparing total tax burden across no-property-tax states
A resident's total tax burden — income tax, sales tax, property tax, and excise taxes combined — varies significantly even among states with no property tax. The following table shows how these states fund services differently:
| State | Income Tax | Sales Tax | Property Tax | Other Major Revenue |
|---|---|---|---|---|
| Hawaii | Yes (1.4–11%) | Yes (4% state) | No | General excise tax, hotel tax |
| Alabama | Yes (2–5%) | Yes (4% state) | No | Business taxes, excise taxes |
| Louisiana | Yes (2–6%) | Yes (4% state) | No | Oil and gas severance tax |
| Delaware | Yes (2.2–5.75%) | No | No | Corporate franchise tax, business licenses |
| Wyoming | No | No | No | Mineral extraction tax, excise taxes |
Wyoming has the lowest overall tax burden for most residents because it has no income tax, no sales tax, and no property tax. However, Wyoming's budget is volatile because it depends on mineral prices. When oil and coal prices fall, the state cuts spending or raises other taxes.
Hawaii and Louisiana have high total tax burdens despite no property tax. Hawaii's combination of income tax and general excise tax creates a high effective tax rate. Louisiana's sales tax is among the highest in the nation. A resident of Hawaii or Louisiana may pay more in total taxes than a resident of a state with moderate property tax but lower sales and income taxes.
Moving to a no-property-tax state: what to know before you relocate
If you are considering moving to Hawaii, Alabama, Louisiana, Delaware, or Wyoming specifically to avoid property tax, research the full tax picture first. Calculate your estimated income tax, sales tax, and other costs in the new state and compare them to your current state. A move that saves property tax may cost you more in sales tax or income tax.
Consider also the cost of living beyond taxes. Hawaii has high housing costs, food costs, and utility costs. Louisiana and Alabama have lower costs of living overall, but specific areas (New Orleans, Baton Rouge) have higher prices. Wyoming has low costs in most areas but limited job markets and long distances between services.
If you own rental property or a business, research how each state taxes business income and real estate investments. Delaware's corporate tax structure may benefit business owners. Louisiana's oil and gas tax may affect mineral rights owners. Wyoming's mineral tax may apply to your holdings. Consult a tax professional in the state you are considering before making a move based on tax assumptions.
Frequently Asked Questions
Do I still have to pay property tax if I move to Hawaii, Alabama, Louisiana, Delaware, or Wyoming?
No. These five states do not tax real property. You will not receive a property tax bill from the county or state. You will still owe mortgage payments, insurance, and maintenance costs, but property tax itself is not a cost in these states.
If there is no property tax, are schools and roads funded differently?
Yes. These states fund schools, roads, and local services through income tax, sales tax, business taxes, or natural resource taxes. Hawaii uses income tax and excise tax. Alabama and Louisiana use sales tax and income tax. Delaware uses income tax and corporate taxes. Wyoming uses mineral extraction taxes and excise taxes. The money comes from different sources, not from property owners.
Is it cheaper to live in a state with no property tax?
Not necessarily. Hawaii has no property tax but the highest cost of living in the nation. Louisiana and Alabama have lower overall costs but high sales taxes. Wyoming has low taxes overall but limited job opportunities and high heating costs. Compare your total tax burden and cost of living in the specific city or region you are considering, not just the property tax rate.
What if I own land or a home in a no-property-tax state but live somewhere else?
You do not owe property tax to the state where the property is located. However, you may owe property tax to your state of residence on real estate you own out of state, depending on your state's tax laws. Consult a tax professional about your specific situation.
Can I deduct property tax on my federal taxes if I live in a no-property-tax state?
No, because you do not pay property tax. However, you can deduct mortgage interest if you itemize deductions on your federal return. You may also deduct state and local income taxes or sales taxes (up to $10,000 per year combined) depending on which you pay and your filing status.