When looking to purchase a home, there are many details to take into consideration. Many people look at the location, features of the home, and, most importantly, the price. While the initial purchase is important, many people overlook and do not consider the property taxes that will continue to be collected year after year.
Property taxes are based on a percentage of your home’s value that owners pay yearly to help fund local schools, libraries, public works maintenance, government administration, and public safety. While the tax rates determine your property taxes, they can also help future homeowners see how much funding goes to public affairs. Tax rates and regulations vary from county to county, which is why it is important to consider the tax rate when purchasing your home. For example: the tax rate in Hawaii is .29% (lowest in the country) and the rate in New Jersey is 2.17% (highest in the country). Although this isn’t a substantial difference in tax rates, the monetary value is more notable. Using the percentages mentioned previously, a $220,000 home has a property tax of $638 in Hawaii and $4,774 in New Jersey.
There are currently no states that do not impose property taxes. While some areas may charge less, the loss of money is made up elsewhere. In Nevada, the property tax rate is less than 1%; however, their losses are regained from money accumulated from tourism. Also, as previously mentioned, taxes help fund public affairs. So, while a lower tax rate might be appealing, other areas may suffer from a lack of funding. West Virginia has one of the lowest tax rates; however, they also have some of the lowest academic scores.
Aforementioned, property taxes are based on the property’s value. Tax assessors review the current market, the homes size and features, and homes that are comparable in size and location. This is typically different than the purchase price of the home. The assessed value for the previous year is multiplied by the levy rate equaling the total amount due. The levy rate is set by the municipal tax authority voted in by residents. They decide this rate based on how much money is needed to be raised for public services needed by the community. With property taxes being an aspect that affects the local community directly, rates for calculating property taxes will vary by county.
Twenty-nine areas in the United States have a property tax rate of 1% or less. It’s important to know which areas are ideal to live in so that planning your finances can be trouble-free.
The Aloha State has the best property tax rates in the country. Maui County is the lowest, at 0.21% and Hawaii County is the highest at 0.39%. But the effective (average) property tax rate is set at 0.29%. On top of an extremely low tax rate, homeowners typically receive between $80,000-$160,000 in exemptions. This means that whatever exemption amount the owner is eligible for is deducted from the assessed value and then taxed. So, instead of being taxed on a $480,000 home, you could only be taxed on a $320,000 home. While the low tax rate and exemptions are enticing, it is important to consider that the average house in Hawaii is more expensive in comparison to other state averages.