Ask any homeowner, and “property taxes” are two of the most hated words in the English language. But taxing citizens based on their home values is also essential since states and even municipalities use the money to pave roads, build schools, hire teachers, police, and firefighters, and fund just about every other project.
In fact, property taxes go back to the foundation of our country. In 1798, Revolutionary War hero Paul Revere reportedly paid a whopping 6% tax rate on his $1,250 Boston home, or $75 each year.
Still today, property taxes are always a hot-button issue in local and even state elections across the country. But there are stark differences between what homeowners pay in a small town in one state compared to a big city in another state. Furthermore, a lower tax rate in high-cost states (like California!) still result in higher tax bills since the home prices are so high. And to complicate matters, many homeowners pay less due to property tax exemptions granted to seniors, people with disabilities, or veterans, for instance.
So let’s dig into some facts about property taxes in the U.S., California, and the Sacramento area:
New Jersey is the state with the highest average property tax bill. In fact, homeowners there pay three and a half times more than the U.S. $2,075 median property tax bill. They also pay 13 times more than the average homeowner in Alabama, the state with the lowest property taxes!
Highest Property Taxes by State
(Based on $150,000 home value)
- New Jersey
- New Hampshire
- New York
Lowest Property Taxes by State
(Based on $150,000 home value)
- West Virginia
- South Carolina
What areas have the lowest property taxes?
Yes, you need to move to Alabama to live in the state with the lowest property taxes in the nation. But Kiplinger’s only ranks it #5 on their list of Most Tax-Friendly States (which includes income and state taxes, etc.)
But Delaware is the state ranked for the lowest tax burden, with no sales tax, low property taxes, and only a nominal tax on beer on wine!
Likewise, Yahoo Finance names Alaska (no income tax) as the #1 tax-friendly state for retirees.
But before you pack up for a move to a state with no income tax, you should know what you’re getting into. According to the Center for Budget and Policy Priorities, states with no income tax charge 8-12% above the national average for property taxes!
According to the Brookings Institute, the Midwest is the region with the highest relative property taxes, even though home prices are low.
While in West Coast states, property tax rates are relatively low despite the fact that home values are sky high. (Although I know many California homeowners who aren’t happy when their property tax bill comes due!)
Some states rely on property taxes to fund their operations more than others. For instance, in Arkansas, property taxes make up only 18.3% of the state’s total tax revenue. But in Texas, homeowner property taxes generate a whopping 45.2% of total tax revenues.
Just because your state applies high property tax rates, it doesn’t mean that everyone pays them equally. Many states and municipalities offer generous exceptions available to help certain segments of the population, like veterans, seniors, people with disabilities, or other homeowners.
Some of the most profound property tax exemptions in the country include:
In Honolulu, Hawaii, homeowners pay the lowest property taxes among big cities. Even though they have the highest median home prices of any state, homeowners don’t have to pay property taxes on the first $80,000 of their home’s value.
In Washington, D.C., homeowners are exempt from paying on the first $69,100 of their home’s value.
And in Boston, MA, homeowners are offered an incredible $126,095 property tax exemption (maybe because city tax collectors learned their lesson with Paul Revere!)
By now, you’re probably chomping at the bit to get some information about property taxes in California, and our greater Sacramento area:
Most California homeowners have heard of Proposition 13, a law approved by voters in 1978 that limits property tax increases.
Not only does it limit property taxes to 1% of a home’s market value, but it limits increases in assessed value to 2% per year.
Thanks to these two manifestations of Prop 13, California homeowners pay below the national average in effective property tax payments.
In fact, the average effective property tax rate in California is 0.81%, compared to the national average of over 1.1%
According to recent estimates, the average property tax rate in Sacramento County (for a $350,000 home value) is 0.949% of the assessed home value.
That’s higher than the average of 0.813% of assessed home value in the rest of California (which comes to $2,846 in this example).
But it’s also significantly lower than the national average of 1.211% of the assessed home value, or $4,239 for the same homeowner in this example.
Here are average effective property tax rates for several counties in and around Sacramento:
- Sacramento County 0.95% (12th highest in the state)
- Yuba 0.95%
- Placer 1.02% (ouch!)
- El Dorado 0.81% (that’s low!)
- Yolo 0.93%