According to WalletHub’s “2017 Property Taxes by State Report,” the average American household spends more than $2,000 on property taxes each year. Perhaps of even greater interest to real estate investors, nearly $12 billion of those property taxes go unpaid each year according to the same study. Interestingly enough, the majority of the states with relatively high property-tax burdens on homeowners tend to be “blue,” or left-leaning states, noted DSNews reporter Aly J. Yale.
Real estate investors considering where to buy investment properties certainly must factor in the cost of property taxes, especially since they will likely not benefit from exemptions that might go to a state resident or homeowner. Assistant professor of accountancy at Georgia State University’s J. Mack Robinson College of Business Sean Cao observed to WalletHub analysts that he believes people considering moving should consider the joint effect of property taxes, income taxes, and sales taxes on their bottom line. For investors, property taxes will likely dominate that consideration since state income and sales taxes may not affect them to the same degree that they would an owner-occupant in a home.
The top five states for expensive property taxes were, in order of greatest to least, were:
1| New Jersey
2| Illinois
3| New Hampshire
4| Connecticut
5| Wisconsin
New Jersey homeowners pay $7,401 annually on a median-priced home in the state, while Illinois homeowners paid $3,995. New Hampshire owners paid a bit more, as did Connecticut homeowners, with annual taxes just over $5,000. These states ranked third and fourth because their effective real estate tax was lower than that of Illinois (2.15 percent and 1.97 percent vs. 2.30 percent, respectively.)
Hawaii had the lowest effective real estate tax rate at 0.27 percent, but thanks to a state median home value of more than $515,000, Hawaiian homeowners still pay more in taxes than residents of many other states. The lowest property taxes by dollar amount were paid by Alabama property owners, who paid $543 on a median-priced home.
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Carole Van Sickle Ellis is the editor-in-chief for Think Realty Magazine. You can reach her at cellis@thinkrealty.com.
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