The Range Is Staggering
Property tax effective rates vary by more than 7x across states. On a $400,000 home:
- New Jersey (2.23%): $8,920/year
- Illinois (2.08%): $8,320/year
- Texas (1.68%): $6,720/year
- National average (~1.1%): $4,400/year
- Colorado (0.51%): $2,040/year
- Hawaii (0.31%): $1,240/year
The difference between New Jersey and Hawaii is $7,680/year — that’s $640/month, enough to cover a car payment or fund an IRA.
What “Effective Rate” Actually Means
The statutory tax rate (what your county publishes) and the effective rate (what you actually pay as a percentage of market value) are often different. Assessed values may be 50-80% of market value depending on jurisdiction.
HomeStats uses effective rates from the Tax Foundation, which represents the actual tax burden relative to median home values. This is the number that matters for your budget.
The Reassessment Trap
Many states reassess property values periodically — some annually, some every 2-5 years. In states with infrequent reassessment, long-time homeowners may pay taxes on a value far below market. But new buyers get reassessed at purchase price.
This creates a tax trap for new buyers. You’re paying more in property tax than your neighbor with an identical home who bought 10 years ago. California’s Proposition 13 is the most extreme example, capping increases at 2% annually regardless of market appreciation, but similar dynamics exist in many states.
States With Purchase-Price Reassessment
In these states, your property tax effectively resets to current market value when you buy:
- California (Prop 13 — resets at purchase, then capped at 2% increases)
- Michigan (capped until sale)
- Florida (Save Our Homes — capped at 3% until sale)
If you’re buying in one of these states, assume you’ll pay significantly more than the current owner.
Homestead Exemptions
Most states offer homestead exemptions that reduce the assessed value for primary residences. These range from $5,000 to $50,000+ off the assessed value. Texas offers a $100,000 school district exemption.
You must apply for these exemptions — they’re not automatic. Filing the homestead exemption application immediately after closing is one of the highest-ROI actions a new homeowner can take.
Common exemptions to claim:
- General homestead (all owner-occupied homes)
- Senior/elderly (age 65+, often with income limits)
- Disability (permanent disability documentation)
- Veteran (service-connected disability)
How Taxes Interact With Affordability
The standard 28% DTI rule for mortgage qualification includes property tax. In high-tax states, a larger share of your qualifying income goes to taxes, leaving less room for the actual mortgage.
On a $400,000 home with a $100,000 household income:
| State | Annual Tax | Monthly Tax | PITI Budget Left for P&I |
|---|---|---|---|
| NJ (2.23%) | $8,920 | $743 | $1,490 |
| TX (1.68%) | $6,720 | $560 | $1,673 |
| National (1.1%) | $4,400 | $367 | $1,866 |
| CO (0.51%) | $2,040 | $170 | $2,063 |
The buyer in New Jersey has $573/month less for principal and interest than the buyer in Colorado — that’s roughly $85,000 less in borrowing power.
No Income Tax ≠ Low Tax Burden
States without income tax (Texas, Florida, Tennessee, Nevada, Washington, Wyoming, Alaska, South Dakota, New Hampshire) often compensate with higher property taxes, sales taxes, or fees.
Texas has no state income tax but a 1.68% effective property tax rate. A household earning $100,000 with a $400,000 home might save $5,000 in income tax but pay $2,320 more in property tax compared to the national average.
Run the total tax burden — income + property + sales — not just one component.
How to Research Before You Buy
- Check the county assessor’s website for the specific property’s current assessed value and tax history
- Ask if reassessment triggers at sale in your target state
- File for homestead exemption immediately after closing
- Appeal if the assessment is high — success rates for appeals average 30-40%
- Compare total tax burden across states, not just property tax in isolation
HomeStats displays effective property tax rates for every state, calculated property tax on the median-priced home, and factors taxes into the total annual cost of ownership and income-needed-to-buy calculations.
The Resale Trap includes a complete property tax analysis framework, including how to identify reassessment risk before purchase and the appeal process that can save thousands.