Property Taxes in the U.S.: State by State Comparison

When it comes to real estate investment in the United States, property taxes can make a significant difference in your net returns and overall strategy. While the U.S. doesn’t have a federal property tax, each state—and even each county or city—sets its own rates, which means your tax burden can vary widely depending on where you choose to invest.

For both domestic and international investors, understanding how property taxes work—and which states offer more favorable conditions—is essential. In this article, we break down how property taxes compare across the U.S. and which states are the most (and least) tax-friendly in 2025.

💡 How Are Property Taxes Calculated?

Property taxes are typically calculated based on two factors:

1. Assessed property value – determined by local tax assessors

2. Local tax rate (millage rate) – set by city, county, and school districts

The basic formula is:Assessed Value × Tax Rate = Annual Property Tax

Rates can vary dramatically—not just between states, but even between neighboring towns. That’s why choosing the right location is key to maximizing profitability.

📉 States with the Lowest Property Taxes in 2025

If your investment strategy is focused on minimizing expenses and maximizing long-term rental income, these states offer some of the lowest effective property tax rates in the country:

State	Average Property Tax Rate
Hawaii	0.27%
Alabama	0.41%
Colorado	0.55%
South Carolina	0.57%
Louisiana	0.56%
Florida	0.89%

✅ Florida, while not the lowest, is one of the most attractive for investors due to its no state income tax, strong tourism economy, and relatively moderate property taxes—especially in vacation rental hotspots like Orlando, Tampa, and Kissimmee.

📈 States with the Highest Property Taxes

Some states offset the lack of income or sales tax with higher property taxes. Others simply have high local spending on schools and infrastructure. If you're investing in one of these states, make sure to factor these taxes into your ROI calculations:

State	Average Property Tax Rate
New Jersey	2.21%
Illinois	2.05%
Connecticut	2.00%
New Hampshire	1.89%
Vermont	1.76%
Texas	1.74%

📌 Note: In states like Texas, despite no income tax, property taxes are high—especially in metro areas. Be sure to assess both your cash flow potential and your ownership costs before purchasing.

🔍 Tips for Investors When Evaluating Property Taxes

• Check county-level rates. Two cities in the same state can have very different tax rates.

• Consider exemptions. Some states offer homestead or investor exemptions that reduce your tax bill.

• Review reassessment rules. Some states reassess property values annually, while others cap increases.

• Factor taxes into pricing. A lower-priced home in a high-tax area might end up costing more in the long run.

🔑 Final Thoughts

Property taxes might not be the most exciting part of real estate investing, but they can make or break your bottom line—especially in the short-term rental market, where every expense impacts your profitability.

Whether you’re purchasing a vacation home in Florida or exploring opportunities in other states, understanding local property taxes is a smart first step. In 2025, savvy investors are looking beyond just purchase price—they're analyzing total cost of ownership and how it affects ROI.

At Dreams N Fun, we help property owners and investors navigate the details of real estate ownership, from taxes to guest management. If you’re looking to invest in Florida’s thriving vacation rental market, we’re here to help.

📩 Get in touch today and let’s talk about your property goals—tax-smart and future-ready.