Legal Matters & Taxes The Top 5 States with No Property Tax in 2018 by Jenna Ramadan May 9, 2018August 18, 2020 by Jenna Ramadan May 9, 2018August 18, 2020 We Introduce You to the ‘Almost’ No Property Tax States Making money in real estate has what we consider its ups and downs. Its lows and highs. The pros and cons. One concept of investing in real estate that likes to feed on your cash is property tax. Imagine a real estate world made of states with no property tax at all. One less money hungry cost for you as a real estate investor. Unfortunately, states without property tax do not exist. However, the real estate world does have some states that come close to being no property tax states. Here, we present you with the states with no property tax in 2018. Defining Property Tax Let’s take a look at what a real estate property tax even is. This tax pertains to real estate, which automatically means an effect on you as a real estate investor. The value of the tax is determined by taking into account the value of the property (which includes the land) you own. Local or municipal governments then assess this value. Understanding what property tax is may be easy on the brain but not so easy on the pockets. States with no property tax benefit from one less tax payment. Related: What You Need to Know About Real Estate Taxes as an Investor Why Does It Exist Purpose. It is only ideal for everything that exists to have a purpose. These property taxes are a major source of income for both federal and state governments. The investment property tax is mainly used by the local municipalities for repair and construction. This can include repairing streets, building bridges, schools, and the like. Other services include education, emergency services, transportation, libraries and parks, as well as a number of recreational activities. You are a part of the state you live in. Therefore, you owe them those taxes to keep the area you’re investing in the nice area it started out to be. States with no property tax at all will probably lack the services your state municipalities provide you. Realistically, these taxes benefit you, even if it financially doesn’t feel like it. Giving away a chunk of your rental property income is unfortunate, but it can be worth it. How Is Property Tax Determined To put this section in more layman terms, your investment property taxes are determined by multiplying the property tax rate by the market value of your property. This value, of course, is recalculated by municipalities and presented to you in the form of a percentage. A number of different boards and legislatures agree on the appropriate amount of tax revenue they will need to “keep the streets clean.” A hearing is scheduled and the budget (that is needed to cover expenses throughout the year without facing financial challenges) is decided on. Then, the cheapest property taxes in the USA are born. How Does Property Tax Affect You and Your Property? Property Tax and Real Estate Investors When buying an investment property, it could be beneficial to invest in property tax free states. However, the majority of property owners like you are subject to the property tax rates determined by legislators. Normally, the municipality hires a tax assessor who basically goes around assigning the property tax rate to real estate investors like you. This is based on the market values at the time of assessment. The payment schedule of when these taxes need to be paid differs from state to state. However, many local property tax codes give mechanisms property investment owners like you can formally context the property tax rate. A rental property tax is not completely avoidable, but it can be corrected and adjusted. Related: Invest in Real Estate in These States with No Property Tax Property Tax and your Property Investment How is income from a rental property taxed? How is the tax rate on your investment property determined? Three methods can be used to find the suitable property tax rate. The Property Valuation Method A property valuation is done by the assessor based on similar sales that have taken place in the area by using property market analysis. With this method, assessors look out for overpricing, underpricing, the location of your investment property, and the overall state of your investment property. The Cost Method Here, the assessor determines the property value by how much it would cost to replace it. An older property would instead determine depreciation amount along with how much the property would be worth if it was empty. The Income Method This is based on the income you make off the investment property if it was rented out. States with No Property Tax When you are looking for an investment property for sale, you consider a number of metrics. For example, if you use a tool like Mashvisor for real estate property analysis, you are provided with data on cash on cash return, cap rate, occupancy rate, and return on investment. All crucial metrics to take into account when buying an investment property. To start looking for and analyzing the best investment properties in your city and neighborhood of choice with Mashvisor, click here. How low or how high property tax is in the state you are interested in is just as important. Lower property taxes could mean keeping a bit more rental income in your pocket. Here are the top states with no property tax provided to you with the help of WalletHub statistics: Related: How to Buy Rental Property Out of State Let’s Talk About Those Numbers There is really no point in seeing numbers if there is no meaning or reasoning behind them. Here is a quick screening of the top 5 states with no real estate tax: Hawaii Although Hawaii has a low property tax, the state has the second-highest income taxes. This results in a high state tax burden in general. Leaders in Hawaii claim the overall burden as a factor contributing to the high prices and grim business environment. As a real estate investor, you should try to take all tax burdens into consideration, especially with states with no property taxes. Alabama The low property tax rate in Alabama is due to the high sales tax rate. Alabama is one of few states that applies full sales taxes to things like groceries or over-the-counter meds. You win some, you lose some in this tax game. It seems like some states with no property tax make up for it with the use of other state taxes. Related: 5 Risks That Come With a Rental Property and How to Mitigate Them Louisiana As you can see, Louisiana is considered one of the states with no property tax due to its low value of .51%. Although the state has favorable property tax rates, the state’s public education is suffering due to the lack of resources. Again, you win some, you lose some. Delaware Ah, the first state of the United States of America represented by the “American holly” flower. It doesn’t get any more American than that. Even though this state is used to being “number one” it is ranked number 4 of the states with no property tax. Out of all the states we have talked about so far, Delaware relies the least on property tax collections as a main source of revenue. In fact, it does not rely whatsoever on property tax. The low rate is a result of Delaware’s reassessing property values, along with the benefits given to them by loyal corporations. Treating these corporations favorably worked out in Delaware’s favor. District of Columbia D.C. is ranked the 5th lowest property tax across the nation. D.C.’s policies are the main contributors to the low property taxes. The homestead deduction policy lowers the amount of a property’s assessment that is subject to property tax. This deduction is adjusted for inflation. D.C. also has an assessment cap, limiting the annual increase in taxable assessment to 10 percent. This means that no matter how much your property value grows in a year, the taxable portion will not grow more than 10%. These two measures allow D.C. to be considered part of the states with no property tax. D.C. is one state to consider for investment properties. Find the best investment properties in cities within any of these states now and save on property taxes. Click here to start your search! To Tax or Not to Tax States with no real estate taxes are sort of the unicorns of real estate. They are non-existent. We can, however, find horses in the wilderness. Close, but not exact. That is the case with these states with low property tax. Being a real estate investor who owns investment properties in states with low property tax lessens one’s tax burden. Stress the phrase “lessens one’s tax burden” and not “completely diminishes.” Where you choose to put your money is up to you in 2018, but be aware of what those tax rates really behold. Mashvisor can be your armor when you need it, giving you the hard data of the real estate world. Start out your 7-day free trial with Mashvisor now. Start Your Investment Property Search! START FREE TRIAL Start Your Investment Property Search! START FREE TRIAL AlabamaDelaware DEHawaiiLocationLouisiana 0 FacebookTwitterGoogle +PinterestLinkedin Jenna Ramadan Jenna is Content Writer at Mashvisor with a passion for creative writing. She enjoys covering all aspects of the real estate investment business. Previous Post Real Estate Investing: The Way to Get Rich Next Post Airbnb Rental Income – The 4 Main Aspects That Can Affect It Related Posts The Best Cities for Airbnb Investment 2018 with High Cash on Cash Return The Pros and Cons of Rent Control for a Landlord Should I Buy a Vacation Home as My First Real Estate Investment? The Most Common Reasons for Lawsuits between Landlord and Tenant The Advantages and Disadvantages of a Real Estate Limited Liability Company When to Hire a Real Estate Attorney The War on Airbnb New York 2018 Special Assessment Tax: What is it? What Is a Real Estate Limited Partnership? The Basics of a Wholesale Real Estate Contract and How to Prepare One What Are the Main Benefits of 1031 Exchange? 10 States with Low Property Tax in 2021 23 Comments Mike11C May 19, 2019 - 1:17 pm “Property taxes” are nothing more than government extortion. Reply GunnyNinja October 18, 2019 - 3:52 pm Well imagine if everyone had to pay for private schools… Reply Mike11C October 18, 2019 - 4:27 pm Well, that would be better than paying property taxes to a school district that you have no children in. I would never put my daughter in school in the district we live in. It ranks one of the lowest in the nation. Also, why should my neighbors, who are retired and on a fixed income, have to pay taxes to the school district? Why shouldn’t people who have kids in school but rent their homes have to pay that tax? Property tax is THEFT, plain and simple. Reply GunnyNinja October 18, 2019 - 5:32 pm They have tax exemptions for that very reason. Retired people would not be paying school tax. You could always live in the mountains… Reply Stephen Anderson November 12, 2019 - 9:09 pm I also disagree with property tax. In my state, parents are allowed to send they’re children to any school then that school gets compensation from the state for that child. Wouldn’t it make more sense to lower property taxes and increase sales tax to pay for education? Then you could also privatize the trash companies. Also, everyone uses the road in front of my house so doesn’t it make more sense to tax everyone for it’s maintenance? Id be fine with a dirt road if I lived off the main highway and lastly, no sewers and I have a septic tank and well another thing is property taxes force you to work and contribute. I read a report about a guy trying to live off the grid but you can’t because you have to pay taxes so he gave natural classes to people like how to build houses the old fashioned way and the government fined him for not following proper modern building codes. It’s almost like land taxes force people to work and be less self reliant. And lastly, property taxes and fines are a method for the government to control what you can and cannot do with your property. A city in my state got so bad that they were making people pay for improvements on they’re houses then raising they’re property taxes because they’re houses looked nicer. How is that fair at all in any way? It’s all a form of control. The absolute worst part about land taxes is if you don’t pay them, even if your house is paid off, they’ll kick you out then sell it for cheap to pay the taxes. Nothing is fair about that at all GunnyNinja November 13, 2019 - 10:08 pm I don’t think anyone is “for” property taxes. I certainly am not, but I understand why they exist. There is a difference. DiegoMadera April 21, 2020 - 7:39 am They exist because people allowed the government to take away their right to actually own land & property outright. You accept it as a good little sheeple & even argue for this communist/socialist idea that they have a right to make you pay rent on what they actually are saying you can never truly own. It’s people like you that make certain that it will never change. 5 States have negligible property taxes and they make up for it with higher income taxes. There should be zero property taxes and zero inheritance taxes so that things can actually be owned and passed on to the next generation regardless of how they choose to live or how much money that they make/have. A poor man ought to be able to live off the land if he wants to and pay nothing for that privilege & pass it on the same way. Anything less is evil. I understand the reason for home invasions and for armed robbery, but I do not justify them on message boards. GunnyNinja April 21, 2020 - 6:48 pm “It’s people like you that make certain that it will never change” How much have people like you accomplished in that regard? I’m sure there are more of you than people “like me”. Understand and justify aren’t the same either, but you keep right on with your rants… DiegoMadera April 24, 2020 - 3:10 am Just FYI from Webster’s- Justify definition is – to prove or show to be just, right, or reasonable, which is exactly what your statements would be perceived as by anyone other than you, showing they were understandable & reasonable. Plus you don’t understand why they do it. They don’t do it for roads or any other improvements. They do it so they can have what you thought you owned if you don’t pay, otherwise they just make it an additional income tax or a flat tax that had nothing to do with what you owned, but you keep right on with your delusions. And I plan to do a great deal about it though bureaucracy, closed courts, and the current virus will make the going slow. GunnyNinja April 24, 2020 - 8:20 am Knock yourself out. Taxes are such a new thing, maybe you can stop them before the idea really takes off… DiegoMadera April 24, 2020 - 5:35 pm I am not trying to get rid of taxes as I made very plain to those who can read. I have no problem with taxes, only taxes which mean you do not own your property. I would gladly accept any kind of raising tax equal to the property tax to perform the same function (as 5 states already do & is a centuries old idea) but only one that does not mean we are Serfs. Get that through your head. The person most quoted by our founding fathers believed that outright ownership of property was the greatest inalienable right there is. It’s also in the Massachusetts Constitution if memory serves me. Again, it’s people like you that keep the status quo and allow this tax that should have never been instituted. Since you have no problem with it, I hope you (or your kids) can’t pay yours one day and they come and get your house and vehicles and then you’ll be singing a different tune. GunnyNinja April 24, 2020 - 6:41 pm Already happened. Happy? Since I can’t MAKE you understand what I said, I’ll let you continue being an asshole and blaming me for your issues. Now go play in traffic… DiegoMadera April 24, 2020 - 8:55 pm No, I’m not happy. I hate that happens to anybody and I only said it because you kept arguing ridiculously like property taxes are understandable, rather than abominable. It’s not my issues, it’s the issue of every American who has to pay these taxes especially those who like you claim, have lost property because of them and yet you still sit around doing & even saying nothing but responding uselessly to anyone who is trying to argue against them. If people who it has happened to don’t stand up, that’s why there’s no hope. What kind of moron loses property to an unjust tax and then spends his time arguing the opposite side for keeping or even understanding it? Not really any traffic in my small town, but lots of property taxes. GunnyNinja April 24, 2020 - 9:03 pm I made two statements of fact. You have interpreted that as “arguing ridiculously”. I already said I am not for property taxes. You ignored that. No traffic huh? Surely there is a train. Small towns always have a train… DiegoMadera April 25, 2020 - 12:44 am The going on ridiculously was completely justified as I will prove. As for your initial “two statements of fact” (sorry you can count to three), the first was not a fact at all & started all this. Mike11C says property taxes are nothing more than government extortion (a real statement of fact. You replied with “Well imagine if everyone had to pay for private schools.” A clear counter statement to his. Then he goes on & ask very good questions & ends with another factual statement- “Property tax is THEFT, plain & simple.” You who have been robbed by them, never agree but counter again making excuses & saying he could always go live in the mountains, again not really facts, just a counter opinion to his fact. Then Steven Anderson makes many more true statements & a good case that there is nothing fair about property taxes and that they should not exist, which you again have to counter. You say no one is for them but you keep countering & then you say you understand why they exist, which is a contradiction of the fact they should not exist. You can’t have it both ways. Either you want them gone or you understand why they exist and you’re okay with it. Anything more is just pure hypocrisy and is proven by your continuing to go on rather than agree with anyone else who says they are wrong. You write like a government Shilling lying troll who comes on to argue for the legitimacy of property tax unceasingly never willing to concede the point, yet you say they’ve robbed you of your property. It’s clearly ridiculous to anyone but you. As for the train, nope, it went out in the 60’s. I’ll leave it at this if you do, but to me any statement that sounds the slightest bit like it legitimizes property taxes is something I’m against. Any counter to people who are against them means you’re for them. It’s that simple. If you keep going, I won’t ever stop. GunnyNinja April 25, 2020 - 12:59 am I don’t care if you keep going. You are so hung up on what I’ve said, and I couldn’t tell you a single thing you’ve said that wasn’t to me. And I didn’t read all of that. You remind me of the “they are coming for my guns” crowd. And I’m a gun owner. It’s not that I defend taxes, it’s that I’m not going to have a heart attack bitching about them. Neither you or I will buy real estate without them in out lifetime. I own my current house outright and property taxes will likely cause me to sell it and move to a condo. SO no, I’m not defending them, I will go to where I can afford them. If you don’t like it, keep spouting off. I have other things to focus on. Go overthrow the government…Damn, no traffic, no trains…A cliff maybe? A well? DiegoMadera April 25, 2020 - 5:02 am Oh right, first you are a guy who lost property because of property taxes but doesn’t want them gone them and now you are a gun owner that doesn’t mind those politician who openly say they are coming to take them away & are winning as in Virginia. You didn’t read the things you responded to? Wow! Who does that? I guess you didn’t read the article either to know that there are already virtually no property taxes in 5 states due to such low rates which should & could be changed to zero if people united against them & they are a model for all other states. The only good thing you said was you weren’t defending them. I’m glad. My point was that if we say things like, we will never be able to buy or sell a house without them in our lifetime, it just makes sure it stays that way. Your mind seems closed and it doesn’t matter if you lose your house and have to move into a condo over it, you’d rather accept the status quo of what your government masters placed on you than to even try to do anything about it. And when you hear those like me who want to do something about it to help people including you, all you can do is disparage us and wish we were dead. I guess the condo is what you deserve then. GunnyNinja April 25, 2020 - 6:51 am Says the guy who wished that my children or I would lose our home. Step off… DiegoMadera April 25, 2020 - 9:18 pm Wishing someone who clearly seemed to be for property taxes would lose their property because of them (a well-deserved irony) is a far cry from wishing they were dead. I still wish that on every person in America who supports, justifies, explains, or does anything other than ridicule & actively oppose property taxes. I’m stepping nowhere. I’ll be here responding as long as you write. My pathetic property tax pen pal. I know you don’t like to read, but perhaps you could read 3 relevant quotes from our founding fathers. I’m just glad you weren’t one of them because we might still be under England. No power on earth has a right to take our property from us without our consent.” John Jay Supreme Cort Justice & Founding father If the system be established on basis of Income, and his just proportion on that scale has been already drawn from every one, to step into the field of consumption, and tax special articles in that, as broadcloth or homespun, wine or whiskey, a coach or a wagon [thus a Car or House], is doubly taxing the same article. For that portion of Income with which these articles are purchased, having already paid its tax as Income, to pay another tax on the thing it purchased, is paying twice for the same thing; it is an aggrievance on the citizens who use these articles in exoneration of those who do not, contrary to the most sacred of the duties of a government, to do equal and impartial justice to all its citizens. — Thomas Jefferson The people of the U.S. owe their independence and their liberty, to the wisdom of descrying in the minute [Gunny that means small not 60 seconds] tax of 3 pence on tea, the magnitude of the evil comprized in the precedent. Let them exert the same wisdom, in watching against every evil lurking under plausible disguises, and growing up from small beginnings. — James Madison GunnyNinja April 26, 2020 - 12:02 am “without our consent” Do you vote? You consented. I didn’t wish you dead. You should be as nimble with your feet as your mouth… DiegoMadera April 26, 2020 - 6:21 am That’s a totally ridiculous lie! Voting is not a consent for property taxes by any stretch of the imagination, where are you getting this crap? I have never consented and do not consent. If there was any politician against property taxes, I would vote for them. You must not understand the meaning of words, your own or those of others. No one I’ve ever voted for in my lifetime has ever added property taxes. They existed here before I began to vote. If it was a ballot initiative and I voted for it then you would be right. Now you have lowered yourself into the absurd because you’ve run out of anything left to say that is relevant plus now you’ve stooped to arguing with the founding fathers. I bet you only read the first one and your brain got tired & obviously confused about what consent means and ignored the part about no power on Earth having the right to take property from us which is exactly what they did to you and you’re still too stupid to stand opposed to them. The only one you oppose is yourself & own self-interest & that of your posterity. The second quote explains why the most important person in the founding of our country and the writing of our constitution, Jefferson, was against property taxes. It requires the consent of the governed & no one but a government official or an argue-like-a-jackass-for-fun-jerk like you would willingly give their consent to property taxes. You may have given yours (in your mind) by voting, but no one else does. Your second lie was saying that you didn’t want me dead, when you wrote you wanted me in traffic and if not traffic (in front of) a train and if not that a (over) a cliff or (down) a well. Words have meaning, well, at least mine do. Yours are just useless ramblings for no cause whatsoever because you have no cause other than arguing very poorly just for the sake of argument. I can’t wait to see what asinine thing comes out of your mouth next to argue FOR something that you are actually AGAINST. Just kidding, I can & wish I could happily wait, eternally. 리주민 April 25, 2020 - 9:38 pm If students are required to attend the district they live in, or attend private or home school; why aren’t teachers required to teach in the district they live in, or teach in private school? Fairs fair. Reply Ernie “glad 2 c u” February 1, 2020 - 1:21 pm You work hard to pay off your house but you never end up owning it!! When you end up on a fixed income and no longer can afford the taxes, you are forced to sell. If you do not sell and you fall behind on your taxes the government can take the house!! Property rights are a hallucination! 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