US States with Highest Property Taxes

Are high property taxes, income taxes, and other rental property fees getting you down?

With high mortgage rates and inflation pressuring everyone in 2023, the last thing homeowners, landlords and tenants need is higher property taxes.

In today’s post, we shed light on those cities and states charging high property taxes.  Among these states are those with low income tax and estate tax, yet overall, you’ll recognize which are welcoming to rental property investment and those that are not.

Being in a state with low taxes is something to appreciate and allows you to invest in areas that benefit your tenants and your business. See info on the states with the lowest taxes below.

Taxing From Every Direction

And when landlords and homeowners can’t pay their mortgages and must sell their properties, another set of sales taxes are activated on the sale.

Those sales and transfer taxes are often based on the belief that sellers are making a windfall profit on a real estate sale. In fact, many purchased their homes in the last few years at high prices after government officials stated inflation was transitory. And now with mortgage renewals come up double the previous rate, we could more small business landlords losing properties through no fault of their own.

This makes tax management one of the most important activities for many small business landlords. See more on how you can raise your tax deductions.

Too often governments target residential real estate for tax revenue given it’s an easy target and many owners have few tax havens to protect their hard-earned assets.

Here’s 7 Reasons why high Residential Real Estate Taxes are a Bad idea:

1. Increased Financial Burden: High taxes erode residents’ and landlord’s income as the taxes eat into available funds for living, putting their budgets to the limit during high inflationary periods.
2. Reduced Affordability: High taxes raise home prices and mortgage costs needed to finance homes, which in turn leads to higher rent prices. For those on fixed incomes, the financial pressures mount, and often it is landlords who are blamed.
3. Lower Property Values: When property taxes are high, it can lower the overall value of real estate and reduce demand for new construction. Potential homebuyers and tenants may be deterred from purchasing or renting properties in areas with high taxes, which can result in decreased demand and push property values down. For landlords, this can result in lower rental income, occupancy and potential difficulty in attracting tenants.
4. Reduced Cash Flow for Landlords: Taxes lower operating budgets and capital budgets. This can limit landlord’s capability to make property improvements, repairs, or expansions, which lowers the tenant’s quality of living and reduces services to tenants.
5. Discourages Residential Property Investment: High residential real estate taxes discourage investment in rental property, and investors will seek lower tax cities and states to buy in, build rental properties, or convert properties to rentals. Construction is deterred as immigration and demand from Millennials and Gen Z aged groups seek a roof over their heads.
6. Discourages Home Ownership: High property taxes can make homeownership less appealing for potential buyers and the residential housing industry is key to a strong economy. Higher mortgage payments, building fees and property taxes discourages first-time buyers or average Americans from buying homes which discourages builders from building them.
7. A Burden for fixed-income individuals: High property taxes affect individuals on fixed incomes, such as retirees or low-income homeowners is worse. When added to inflation, and rising mortgage rates, it makes living painful for those with static incomes that may not grow with inflation.

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WalletHub’s Report on Cities with the Highest Taxes

The latest property tax report from WalletHub shows those states that go to homeowners to collect the highest taxes. Those states that rank the worst for property taxes are New Jersey, Illinois, Connecticut, New Hampshire, New York, and Vermont. Hawaii, Alabama, Colorado, Nevada and South Carolina.

Taxes in blue states are 6.2% higher than red states. Virginia, Mississippi, Missouri, South Carolina, and Massachusetts charge the highest vehicle property tax rate (annual property tax & a local registration fee if it is normally garaged or parked in the state).

Lowest Property Taxes by State

This list provided by Wallethub in their recent report shows which states are making it easier on landlords and tenants. Full report for all US states is available here.

Lowest Property Taxes in the US. Screenshot courtesy of Wallethub.com

Highest Property Tax Rates by State (Wallethub data)

• New Jersey (2.47% for $6057 annual charge)
• Ilinois (2.23% for $5465 annual charge)
• Connecticut (2.15% for $5256 annual charge)
• New Hampshire (2.09% for $5120 annual charge)
• Vermont (1.90% for $4652 annual charge)
• Texas (1.74% for $4255 annual charge)
• New York (1.73% for $4231 annual charge)

Major US Cities with the Highest Property Tax

Construction Coverage conducted their research on US cities with the highest property tax rates for owner-occupied homes:

Their top 15 List of major metros are:

1. Rochester, NY 2.4%
2. Hartford-East Hartford-Middletown, CT 1.9%
3. Chicago-Naperville-Elgin, IL-IN-WI 1.9%
4. Buffalo-Cheektowaga, NY 1.8%
5. Cleveland-Elyria, OH 1.7%
6. Dallas-Fort Worth-Arlington, TX 1.6%
7. Houston-The Woodlands-Sugar Land, TX 1.6%
8. Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 1.5%
9. Milwaukee-Waukesha, WI 1.5%
10. San Antonio-New Braunfels, TX 1.5%
11. Columbus, OH 1.5%
12. New York-Newark-Jersey City, NY-NJ-PA
13. Austin-Round Rock-Georgetown, TX 1.4%
14. Pittsburgh 1.4%
15. Detroit-Warren-Dearborn 1.3%

Of small to medium-sized cities, they found these to have the worst property tax rates:

• Rockford IL – 2.3%
• Bloomington 2.2%
• Binghampton NY 2.2%
• Atlantic City NJ 2.0%
• Trenton-Princeton NJ 2.45
• Syracuse NY 2.3%
• El Paso TX 1.9%
• Manchester-Nashua NH 1.8%
• Allentown PA 1.7%
• McAllen TX 1.7%
• Des Moines, IA 1.6%

We should mention that Texas property owners are blessed with zero income tax which is a sizable incentive for investment in that state.

There is no end to the extent of taxation on individual homeowners and the negative effects it has on how Americans live. And rates can grow.

In those states with rent controls, the issue for renters and homeowners is even more intense, as there is no way for property owners to offset the costs. This makes renoviction and panic property sales even more likely which requires real estate and legal expenses.  And the next owner will pay the burden of the property transition.

One of the key uses of property management accounting software is to manage and minimize all tax losses. The smaller the business, the more of a burden property taxes are.  The threat of higher taxes is one which property management companies and landlords must contend with in the years ahead.

See more on how you can minimize your property taxes.

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