PHILADELPHIA - Almost half of all American homeowners will pay property taxes, but not all of them will pay as much as their neighbors. Some States have very low property taxes while others have high taxes on other things. If you want to avoid paying property taxes in your state, there are many things you can do.
State income tax
A state's tax burden is determined by determining how much of your income is required to cover state and local taxes. This burden can be high or low, depending on your financial situation. Most states have income taxes, but there are also sales taxes, capital gains taxes, and property taxes. For example, in 2021, Alaska had the lowest tax burden but was also the least affordable state to live in.
Among states, only the District of Columbia and New York increased their individual income tax rates, while the rest had no changes to their tax laws. However, Arizona's tax changes for 2022 involve unwinding a prior ballot measure that introduced a high earners tax and an 8 percent top rate. In response, Arizona lawmakers lowered base rates and adopted revenue triggers to ensure that the combined top rate would never exceed 4.5 percent.
The top rates of state income taxes vary by income. For example, California's top rate is 13.3%. However, it's important to remember that California also imposes a 1% mental health service tax. In addition, each state has a different floor for personal income taxes and has its own definition of what constitutes taxable income. Some states, such as New Hampshire, limit their income taxes to interest and dividend income, while Pennsylvania has a flat tax that applies to all income.
Iowa's income tax rate is currently the third highest in the country. In addition to this, the state's income tax bill includes local income taxes, such as Appanoose County. The top state income tax rate is expected to decline over the years, and a flat 3.9% rate is set to apply in 2026.
The average state income tax rate is 6.25% for single filers and 7.5% for married couples. The tax rate is higher than the national average and is thus not affordable for middle-class taxpayers. Nonetheless, there are many states with low state income tax rates.
The low state income tax is one of Texas's carrots to attract employers. It's long been used as an economic attraction by employers.
State property tax
Several factors determine a State's property tax ranking. New Hampshire, for example, has one of the highest effective property tax rates in the U.S., at almost 1.8%. However, this figure is lower than the costs of many properties in other states. The state also has a low average home value, lowering its tax burden on its neighbors. New York City also reduced its property tax rates in 2023. Its preliminary assessment roll reports that the city's overall market value is about $1.398 trillion, an 8.2% increase from FY 2022. The Bronx saw the most housing development among boroughs, with a 20.7 percent increase.
The value of taxable property is based on its assessed value, which is an estimate of its market value based on a series of manuals, tables, and procedures. The total tax base is then used to determine the amount of property taxes a county needs to collect each year.
Taxes can be a huge drain on a family's disposable income. State and local sales, property, license, inheritance, and estate taxes can consume a large portion of your income. Therefore, identifying the states with the lowest property taxes is a smart financial move. While identifying the lowest tax rates can help you stretch your dollar, it is still important to consider the state's financial situation.
Pennsylvania's property tax rates are relatively high, but the average home value is still under $260,000, making it a bargain. Ohio, meanwhile, has the second lowest average home value in the U.S., but property taxes in the state are higher than those in the top half of the list.
New York City's property taxes are modest and are half the statewide average. However, many counties in the state have rates that exceed two percent, more than twice the national average of 1.07 percent. The 2023 form will be posted on January 1st. For more information, visit the Maine Municipal Assessors page.
