The 3 States With The Highest Property Taxes That You Should Know About
Feel like it's time to move to a new state but not sure which one to pick? Choose carefully and you could save some much-needed cash. After all, according to The Guardian, inflation in the United States recently hit a whopping 8.6% meaning many household budgets are feeling an inevitable strain. If you move to where the cost of living is cheaper, you'll have a better shot at escaping the worst of inflation's greedy claws — especially if you work from home and can keep your current salary. However, it's important to factor in property taxes when figuring out what city is best for you because this often-overlooked expense can significantly eat into (or burn up) your savings.
Even if you're planning on renting for the moment, it's still a good idea to keep an eye on property tax rates. As they increase, there's a good chance your landlord will adjust your rent to cover losses. According to the Centre for Real Estate, rent is usually adjusted to cover 80 to 90% of property tax hikes. There's also the possibility that you'll love your new state so much you'll eventually want to purchase your own home there. If you've moved to an area with high property taxes, this can have a big impact on your future budget and force you to buy a smaller home. While these might not be deal breakers for everyone, it's still generally a good idea to keep in mind which states have higher-than-average property taxes.
New Hampshire
Coming in as the state with the third most expensive property taxes according to Rocket Mortgage, New Hampshire residents must pay at a 2.05% tax rate. This can lead to major housing costs for both renters and property owners alike. According to New Hampshire Public Radio, the average house price is over $400,000, which translates to paying at least $8,200 in property taxes. Plus, rental vacancy rates are under 1% and that makes it easy for landlords to pass along high costs to tenants that are struggling to find any available units.
Fortunately, if you're considering a move to New Hampshire, the high property tax rates may not equal the large financial strain you might be imagining. According to the World Population Review, New Hampshire has the third-highest average household income of any American state. While you might have a steeper property tax bill or monthly rent to pay, there's a good chance you'll also be raking in more income.
Illinois
With the second most expensive rates in the country, Illinois residents are paying an incredible 2.27% in property taxes according to Roofstock. Fortunately, houses in the Prairie State are relatively affordable which keeps costs lower than expected. Per Norada Real Estate Investments, the average Illinois home sold for $276,000 in May 2022, which is around 60% of the national listing average of $447,000 (via Realtor's housing market trends report). In other words, the average Illinois household can expect to pay around $6,265.20 in property taxes each year.
That being said, Illinois' overall tax structure can either be a blessing or a curse depending on your income level. According to Tax Foundation, Illinois is one of the few states that has a flat income tax rate at 4.95%. This can be significantly cheaper than other states' progressive tax structures, which heavily penalize big earners. If you're making a lot of money, you may find that you're paying less taxes overall when living in Illinois. On the flip side, if your income is relatively low, you may pay more in both income and property taxes than you would elsewhere.
New Jersey
Wondering which state really takes the cake? Coming in with a 2.49% tax rate, New Jersey has the steepest property taxes in the country according to WalletHub. Unfortunately, this is also paired with sky-high real estate prices. Zillow's analytics found that the average New Jersey home costs $461,990, leading to an astronomical $11,504 in annual property taxes.
While some states' high property tax rates are offset by the fact that their other taxes are relatively mild, New Jersey residents aren't lucky enough to catch that break. According to The Balance, New Jersey's maximum income tax rate is 10.75% — the fourth highest in the country. That being said, New Jersey only has the 11th most expensive cost of living according to the World Population Review's breakdown by state. While life in the Garden State might not be cheap, it's far from the most expensive (though it is one of the most taxing).