Property taxes are the second-largest ongoing cost of homeownership after the mortgage itself. And unlike your mortgage payment, they go up over time, often faster than inflation.
The Range Is Enormous
Effective property tax rates (taxes paid as a percentage of home value) range from 0.27% in Hawaii to 2.23% in New Jersey. On a $400,000 home, that’s the difference between $1,080 and $8,920 per year.
Lowest Effective Property Tax Rates
| State | Rate | Annual Tax on $400K Home |
|---|---|---|
| Hawaii | 0.27% | $1,080 |
| Alabama | 0.39% | $1,560 |
| Colorado | 0.55% | $2,200 |
| Nevada | 0.55% | $2,200 |
| Louisiana | 0.55% | $2,200 |
Highest Effective Property Tax Rates
| State | Rate | Annual Tax on $400K Home |
|---|---|---|
| New Jersey | 2.23% | $8,920 |
| Illinois | 2.08% | $8,320 |
| Connecticut | 1.96% | $7,840 |
| New Hampshire | 1.93% | $7,720 |
| Vermont | 1.83% | $7,320 |
Check the HomeStats state pages for your state’s effective rate and estimated annual tax based on the median home price.
How Assessed Value Works
Your property tax bill equals your assessed value multiplied by the local mill rate. But assessed value is not necessarily market value.
Most states assess property at some fraction of market value. Some reassess annually. Others only reassess when a property sells or at fixed intervals. This creates situations where long-time homeowners pay significantly less than recent buyers for identical neighboring homes.
Common assessment systems:
- Annual reassessment: Property value tracks market value. Taxes rise with appreciation.
- Sale-triggered reassessment: California’s Proposition 13 model. Value is locked at purchase price and capped at 2% annual increases until the next sale.
- Periodic reassessment: Every 3-5 years, sometimes longer. Creates jumps when reassessment catches up to market movement.
The SALT Cap Effect
Since 2017, the federal deduction for state and local taxes (SALT) has been capped at $10,000. In high-tax states like New Jersey, New York, Connecticut, and Illinois, many homeowners exceed this cap with property taxes alone.
This effectively increases the after-tax cost of property taxes for higher-income homeowners in these states. A married couple in New Jersey with $9,000 in property taxes and $6,000 in state income taxes can only deduct $10,000 total, losing $5,000 in deductions.
How to Appeal Your Assessment
If your assessed value exceeds your home’s actual market value, you can appeal. Success rates vary by jurisdiction, but typically 30-50% of appeals result in some reduction.
Steps to appeal:
- Get your current assessed value from the county assessor’s website
- Pull comparable sales (3-5 similar homes sold in the past 6-12 months)
- Note any condition issues, needed repairs, or negative factors (busy road, power lines)
- File a protest by the deadline (typically 30-90 days after assessment notice)
- Present your case at the hearing with comps and photos
Even a 10% reduction on a $400,000 assessment in New Jersey saves $890 per year, every year until the next reassessment.
Property Tax Trends
Property taxes have outpaced inflation in most states for the past decade. As home values have risen sharply since 2020, many homeowners face significant assessment increases even in states with moderate rates.
Some states have homestead exemptions, senior freezes, or caps on annual increases. These provisions vary dramatically by state and are worth researching for your specific situation.
The HomeStats state pages show estimated annual property tax for the median-priced home in each state, so you can compare the actual dollar impact, not just the rate.
Property taxes are one of the many costs that make homeownership significantly more expensive than the mortgage payment alone. For the complete breakdown, read The Resale Trap.