No state has zero property tax, but four states charge almost none
There is no state in the United States with no property tax at all. However, Hawaii, Alabama, Louisiana, and Mississippi have property tax rates so low that they function differently from the rest of the country. Hawaii's effective rate is around 0.28% of home value. Alabama, Louisiana, and Mississippi each fall between 0.4% and 0.5%. For comparison, the national median is around 0.8%, and some states exceed 2%.
The reason these four states keep rates so low is structural. Hawaii taxes property at a statewide rate rather than letting counties set their own, which keeps the baseline minimal. Alabama, Louisiana, and Mississippi offer broad exemptions—for homesteads, agricultural land, and business property—that remove large portions of the tax base, forcing the rate on remaining property to stay low to generate revenue.
If you own a home in one of these states, you will still pay property tax. The difference is the amount. A $300,000 home in Hawaii costs roughly $840 per year in property tax. The same home in New Jersey, which has one of the highest rates, costs around $8,000 per year.
Key Takeaways
- Hawaii, Alabama, Louisiana, and Mississippi have the lowest property tax rates in the country, all under 0.5% of home value.
- These states use exemptions and statewide rate-setting to keep property tax low, not because they have eliminated it entirely.
- Even in the lowest-tax states, you will owe property tax annually if you own real estate.
- Property tax rates vary within states—a county or city in a low-tax state may still charge more than the state average.
How Hawaii keeps property tax so low
Hawaii is unique because the state government sets property tax rates statewide rather than allowing counties to set their own. The statewide rate is capped by law at 0.6% of assessed value, and the actual rate charged is lower. This centralized system prevents the kind of local variation that drives rates up in other states.
Hawaii also taxes property based on a statewide assessment system. The state assessor determines value, not individual county assessors, which creates consistency and limits the ability of local governments to raise rates independently. Counties can add small surcharges for specific purposes, but the base rate remains controlled at the state level.
The trade-off is that Hawaii funds schools and services through other revenue sources, including a general excise tax (similar to sales tax) that applies to most transactions. Residents pay property tax at a much lower rate than mainland states, but they pay higher taxes in other categories.
Why Alabama, Louisiana, and Mississippi have low rates
These three states use a different mechanism: broad property exemptions that shrink the tax base. In Alabama, homesteads are exempt from a portion of their assessed value. Agricultural land and business property receive separate exemptions. When large categories of property pay little or no tax, the rate on taxable property must stay low to generate enough revenue for schools and local government.
Louisiana uses a similar homestead exemption system. The first $75,000 of a primary residence's assessed value is exempt from property tax in most parishes. This means a $300,000 home is taxed on only $225,000 of value. Mississippi offers homestead exemptions as well, though the amount varies by county.
These exemptions are popular politically because they reduce the tax burden on owner-occupied homes and farms. The result is that renters and owners of investment property carry a larger share of the tax burden, and rates remain low overall because the tax base is smaller.
Local variation within low-tax states
Even in states with low average rates, individual counties and cities set their own rates within state limits. A county in Alabama may charge a higher rate than the state average if local voters approve it for schools or infrastructure. The same applies in Louisiana and Mississippi.
If you are considering a move to one of these states for tax reasons, check the specific county or parish rate, not just the state average. A county in a low-tax state can still charge more than a county in a higher-tax state if local needs are greater.
Property tax bills also include assessments for schools, fire districts, and other local services. These vary widely even within the same state. Your actual bill depends on where the property sits, not just the state you live in.
How property tax rates are set and changed
In most states, including the four with the lowest rates, property tax is set through a combination of state law and local government action. The state legislature sets the maximum rate and defines exemptions. Local governments—counties, cities, school districts—then set their actual rates within those limits.
Rates can change year to year if local governments vote to raise them. In Hawaii, the statewide rate is set by law and rarely changes. In Alabama, Louisiana, and Mississippi, individual counties can raise rates if voters approve or if state law permits, but they cannot exceed the state cap.
Property assessments also affect your bill. Even if the tax rate stays the same, your bill rises if your home's assessed value increases. States use different methods to assess property—some use recent sales prices, others use income potential, and some use a combination. Assessment practices vary significantly, which is why two homes of similar market value can have different tax bills.
States with moderate property tax rates as an alternative
If you are looking for lower property tax but the four lowest-tax states are not practical for you, several states fall in the moderate range. South Carolina, West Virginia, Kentucky, and Arkansas have effective rates between 0.5% and 0.7%. Oklahoma, New Mexico, and Colorado range from 0.6% to 0.8%.
These states still charge property tax, but the burden is noticeably lower than the national average. They typically use a mix of homestead exemptions and moderate rate-setting to keep costs down. If you own a $300,000 home in South Carolina, you might pay $1,500 to $2,000 per year, compared to $840 in Hawaii or $8,000 in New Jersey.
The trade-off in moderate-tax states is usually higher income tax or sales tax. States that keep property tax low often fund services through other revenue sources. Before moving for tax reasons, compare your total tax burden across property, income, and sales taxes, not just property tax alone.
Frequently Asked Questions
Can I avoid property tax by moving to Hawaii or Alabama?
No. You will still owe property tax in these states if you own real estate. The difference is the amount—it will be much lower than in high-tax states. You cannot eliminate property tax by choosing where to live; you can only reduce it.
Do renters pay property tax in low-tax states?
Renters do not pay property tax directly. The landlord pays it, and that cost is often reflected in the rent charged. In states with low property tax rates, rent may be lower than in high-tax states, but the relationship is not direct or may provide.
If I own property in two states, do I pay tax in both?
Yes. Property tax is owed to the state and county where the property is located, regardless of where you live. If you own a home in Hawaii and a rental property in New Jersey, you owe property tax to both states on their respective properties.
What happens if I don't pay property tax?
The county can place a lien on your property, seize it through foreclosure, or sell it at auction to recover the unpaid tax. Property tax is a legal obligation, and nonpayment has serious consequences in every state, including those with low rates.
Are property taxes in low-tax states going up?
Property tax rates and assessments change over time in response to local budget needs and state law changes. Hawaii's rate has remained relatively stable due to state-level control. Rates in Alabama, Louisiana, and Mississippi can increase if counties vote to raise them or if state law changes, but they remain among the lowest in the country.